E22-13B (Change in Principle—Long-term Contracts) Black Hoe Construction changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015.

E22-13B (Change in Principle—Long-term Contracts) Black Hoe Construction changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as

follows.

                                                                      Pretax Income from:                                                     

                  Percentage-of-Completion           Completed-Contract                  Difference

2014                   $125,000                                    $ 25,000                                   $100,000

2015                     360,000                                     200,000                                      160,000

Instructions

(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2015?

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