On January 1, 2011, Randall Construction decided to change from the completed contract method of accounting for long-term construction contracts to the percentage-of-completion method. The company will continue to use the completed contract method for tax purposes.
The tax rate is 30%. The following are all relevant data concerning the change.
|
Year |
Income before income tax % of Completion |
Completed Contract |
|
Before 2010 |
500,000 |
300,000 |
|
2010 |
400,000 |
250,000 |
|
2011 |
450,000 |
400,000 |
Required:
(1.) Prepare the journal entry to record the accounting change.
(2.) Determine the net income to be reported in the 2011-2010 comparative income statements.