Question

Blossom Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, 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 appears below.

2019 2020 2021


Completed contract $300,000 $200,000 $100,000


Percentage-of-completion 500,000 250,000 180,000

Answer 1

Check the explanation

Step-by-step explanation:

Percentage-of-completion(2013 + 2014) - Completed contract(2013 + 2014) * 1 -.40

= $500,000 + $ 250,000 - $300,000 +$200,000 *0.60

=$750,000-$500,000 * 0.60

=$250,000 * 0.60

=$150,000 to record the income effect