Accounting change on prior periods


During 2008, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. The following lists include gross profit figures under both methods for the past 3 years:

Completed-Contract Percentage-of-Completion

2006 $475,000 $800,000
2007 625,000 950,000
2008 700,000 1,050,000
$1,800,000 $2,800,000

Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of what?

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Accounting Basics: Accounting change on prior periods
Reference No:- TGS075779

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