Kingbird Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows.

Pretax Income from:

Percentage-of-Completion Completed-Contract Difference

2020 $752,200 $586,700 $165,500
2021 683,500 444,700 238,800

(a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021?

(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?

a) 2021 year income: 526,540

b) journal entries

income tax expense    225.660‬ debit

    income tax deferred liability (*1)  49.650‬ debit

    income tax payable    176.010‬ credit

Explanation:

Year   AccountingTax purposeDifference

2020752200586700165500

2021683500444700238800

2021

752,200 x 30% = 225,660

after tax income: 526.540‬

2022

683,500 x 30% = 205,050

after tax income:   478.450‬

We recognize the income tax expense n the accounting method of revenue/expense recognizition

while, the payable will use the goverment purposes.

Then, the differnce wi considered either income tax deferred.

*1 it is a liability as the company is paying lower taxes to day to pay more than before.

answer; ///i believe that the correct answer is (a) it is the means by which a person earns money;

the answer would be voluntary exchange -

"the act of buyers and sellers freely and willingly engaging in market transactions. moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred."

hope this : )

-shy