During 2015, a Construction Company Changed from the Completed-Contract Method

question 65

Multiple Choice

During 2015, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: 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

• A) $660,000 on the 2015 income statement.
• B) $450,000 on the 2015 income statement.
• C) $660,000 on the 2015 retained earnings statement.
• D) $450,000 on the 2015 retained earnings statement.