Bryant Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2010. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows.
Pretax Income from:
Percentage of Completion Completed Contract Difference
2009 $972,200 $745,700 $226,500
2010 922,700 493,100 429,600
Instructions
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2010?
(b) What entry is necessary to adjust the accounting records for the change in accounting principle? (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)