Question 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

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

2. Which of the following is accounted for as a change in accounting principle?

3. A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a

4. Presenting consolidated financial statements this year when statements of individual companies were presented last year is

5. During 2008, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. The following lists include gross profit figures under both methods for the past 3 years:

Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of what?

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?

7. The deferred tax expense is the

8. A company records an unrealized loss on short-term securities. This might result in what type of difference and in what type of deferred income tax?

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