Use the Following Information for Questions 44 and 45

question 3

Multiple Choice

Use the following information for questions 44 and 45.
Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2015. In 2015, it changed to the percentage-of-completion method.
The company decided to use the same for income tax purposes. The tax rate enacted is 40%.
Income before taxes under both the methods for the past three years appears below.
-Which of the following will be included in the journal entry made by Dream Home to record the income effect?

• A) A debit to Retained Earnings for $150,000
• B) A credit to Retained Earnings for $150,000
• C) A credit to Retained Earnings for $100,000
• D) A debit to Retained Earnings for $100,000

---

Definitions:

Ethnomethodologists

Researchers who study the routine methods and practices people use to construct a stable social world through everyday interactions.

Psychological Character Traits

Enduring qualities or characteristics that individuals possess, influencing their behaviors, attitudes, and how they interact with the world and others.

Ethnomethodology

A sociological perspective that examines the everyday methods people use to make sense of and navigate their social worlds.

Internal Strains

Refers to pressures or tensions experienced within an entity, organization, or individual, often leading to challenges in functioning or mental stress.