On January 1, 2020, Hampton's Construction, Inc What Is the Journal Entry to Record the Change in from the Completed-Contract

question 46

Multiple Choice

On January 1, 2020, Hampton's Construction, Inc. decided to change from the completed-contract method of accounting to the percentage-of-completion method. Hampton will continue to use the completed-contract method for income tax purposes. The following information is available for net income. The income tax rate for all years is 35%. Net Income
$\begin{array}{ccc}\underline{ \text { Year Ended }} & \underline{\text { Percentage of Completion }} & \underline{\text { Completed Contract} } \\ \text { December } 31,2018 & \$ 149,000 & \$ 126,000 \\ \text { December } 31,2019 & 178,000 & 156,000 \\ \text { December } 31,2020 & 281,000 & 181,000 \\\end{array}$

What is the journal entry to record the change in accounting principle on January 1, 2020?

• A) No entry needed.
• B) \(\begin{array}{llcc}
• \text { Construction in Progress} &45,000\\
• \text { Retained Eamings} &&45,000\\
• \end{array}\)
• C) \(\begin{array}{ll}
• \text { Retained Earnings } & 65,000 \\
• \text { Deferred Tax Asset } & 35,000 \\
• \text { Construction in Progress } &&100,000
• \end{array}\)
• D) \(\begin{array}{l}
• \text { Construction in Progress }&45,000 \\
• \text { Deferred Tax Liability } &&15,750\\
• \text { Retained Earnings }&&29,250
• \end{array}\)

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