1. 1. Before 2020, Wangerin accounted for its income from long-term construction contracts using the zero-profit method. Early in 2020, Wangerin changed to the percentage-of-completion basis for accounting purposes. It continues to use the zero-profit method for tax purposes. Revenue from long-term contracts for 2020 has been recorded using the percentage-of-completion method. The following information is available.

		Pre-tax Income
		Percentage-of-Completion		Zero-Profit Method
Prior to 2020		$450,000		$315,000
2020		180,000		60,000

2. 
   
3. 2.Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $3,300 because “the amount of the cheque is about the same every year.”
4. 
   
5. 3.Reported sales revenue for the year is $2,147,000. This includes HST collected for the year. The HST rate is 13%. Because the sales tax is forwarded to the Receiver General for Canada, the Sales Tax Expense account was debited. The bookkeeper thought that “the sales tax is a selling expense.” At the end of the current year, the balance in the Sales Tax Expense account is $203,400.

Instructions

Prepare the journal entries necessary at December 31, 2020, to record the above corrections and changes. The books are still open for 2020. The income tax rate is 30%. Wangerin has not yet recorded its 2020 income tax expense and payable amounts so you may ignore current-year tax effects. Prior-year tax effects must be considered in item 2.

Answer rating: 100% (QA)

1 Retained Earnings AC DR 315000 TO Income Tax payable AC 31500... View the full answer