Pan Erickson Construction Company changed from the completed-contract to the percentage-of-compleltion method of accounting for long-term construction contracts during 2008. For tax purposes, the company employs the completed-contract method and will continue this approach i nthe future.(hint: adjust all tax consequences through the Deferred Tax Liability account). The appropriate information related to this change is as follows: pretax income from: percentage-of-completion in 2007 $780,000, and completed-contract $590,000, and difference $190,000, in 2008 percentage-0f-completion $700,000, completed-contract $480,000, and difference $220,000.
a-Assuming that the tax rate is 35%, what is the amount of net income that would be reported in 2008?
b-What entry(is) are necessary toadjust the accounting records for the change in accounting principle?