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Wertz Construction Company decided at the beginning of 2014 to change from the completed- Contract...

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Accounting

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Wertz Construction Company decided at the beginning of 2014 to change from the completed- Contract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2014, pretax income under the two methods was as follows: percentage-of-completion $120,000, and completed-contract $80,000. The tax rate is 35%. Prepare Wertz's 2014 journal entry to record the change in accounting principle. Refer to the accounting change by Wertz Construction Company in BE22-1. Wertz has a profit- sharing plan, which pays all employees a bonus at year-end based on 1% of pretax income. Compute the indirect effect of Wertz's change in accounting principle that will be reported in the 2014 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers

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