A Company Changes from Percentage-Of-Completion to Cost-Recovery, Which Is the Method

question 45

Multiple Choice

A company changes from percentage-of-completion to cost-recovery, which is the method used for tax purposes.The entry to record this change should include a

• A)debit to Construction in Process.
• B)debit to Loss on Long-term Contracts in the amount of the difference on prior years, net of tax.
• C)debit to Retained Earnings in the amount of the difference on prior years, net of tax.
• D)credit to Deferred Tax Liability.

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Definitions:

GDP

Gross Domestic Product represents the complete market value of all final goods and services produced inside a nation's boundaries over a specific time frame.

Disposable Personal Income

The amount of money that households have available for spending and saving after income taxes have been accounted for.

Gross National Product

The total value of all goods and services produced by a country's residents and businesses, including those produced abroad, over a specific time period.

National Income

The total amount of money earned within a country, including wages, rent, interest, and profits.