ACC/545 final 45 out of 45 correct 1) A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a | A. debit to Retained Earnings in the amount of the difference on prior years, net of tax. | | B. debit to Loss on Long-Term Contracts in the amount of the difference on prior years, net of tax. | | C. credit to Deferred Tax Liability. | | D. debit to Construction in Process. | | | | 2) Which of the following is accounted for as a change in accounting principle? | A. A change from expensing immaterial expenditures to deferring and amortizing them as they become material | | B. A change from the cash basis of
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| A. $390,000 on the 2008 income statement | | B. $600,000 on the 2008 income statement | | C. $390,000 on the 2008 retained earnings statement | | D. $600,000 on the 2008 retained earnings statement | | | | 6) On January 1, 2005, Baden Co. purchased a machine, which was its only depreciable asset, for $300,000. The machine has a 5-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2008, for financial statement reporting, Baden decided to change to the straight-line method for depreciation of the machine. Assume that Baden can justify the change.
Baden's income before depreciation, before income taxes, and before the cumulative effect of the accounting change, if any, for the year ended December 31, 2008, is $250,000. The income tax rate for 2008, and for 2005 through 2007, is 30%. What amount should Baden report as net income for the year ended December 31, 2008? | A. $91,000 | | B. $60,000 | |