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 are as shown below.
1) What amount will be debited to Construction in Process account, to record the change at beginning of 2015?
2) 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
Net tax is calculated from the taxable income. it is applicable on the all the assessee have an income of the specific limit and others have to file there income tax return annually.
Answer and Explanation: 1
|1.)Income as per new method (500,000 + 250,000)||$750,000|
|Actual reported income until 2014 (300,000 + 200,000 )||$500,0...|
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fromChapter 23 / Lesson 23
Few people like to pay taxes, and one idea that's often proposed to change the current system is by shifting from a progressive income tax to a proportional tax. Learn to define what a proportional tax is, with examples, and explore the debate surrounding the strategy.