Shelley Construction Began Operations in 2010 and Appropriately Used the Completed-Contract

question 3

Multiple Choice

Shelley Construction began operations in 2010 and appropriately used the completed-contract method in accounting for its long-term construction contracts.Effective January 1, 2012, Shelley changed to the percentage-of-completion method for both financial and tax reporting and can justify the change.Although cumulative pretax income up to January 1, 2012, was $800, 000 using the completed-contract method, cumulative pretax income would have totaled $1, 100, 000 had the percentage-of-completion method been used.Assuming an income tax rate of 30%, Shelley's 2012 financial statements should report a marginal change in its January 1, 2012 balance in Retained Earnings to restate it for the effect of the accounting change in the amount of

• A)$ 0
• B)$ 90, 000
• C)$210, 000
• D)$300, 000

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Definitions:

World Trade Organization

An international organization that regulates international trade.

Economies of Scale

Cost advantages achieved when increasing production leads to lower fixed costs per unit.

Restrictive Health

Policies or practices designed to restrict or control the availability of medical treatments, procedures, or resources, often for regulatory or budgetary reasons.

Export Subsidies

financial support from governments to domestic companies for the purpose of promoting goods for export, aimed at increasing competitive advantage on the global stage.