FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature. To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

Question

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Answer 1

Question

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

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Students have asked these similar questions

(Interim Reporting) Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its stockholders and the Securities and Exchange Commission (SEC) at the end of the first quarter of the 2017–2018 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the firstquarter of the year. Sales revenue $60,000,000 Cost of goods sold 36,000,000 Variable selling expenses 1,000,000 Fixed selling expenses 3,000,000 Included in the fixed selling expenses was the single lump-sum payment of $2,000,000 for television advertisements for the entire year.Instructions(a) Snider Corporation must issue its quarterly financial statements in accordance with generally accepted accounting principles regarding interim financial reporting.(1) Explain whether Snider should report its operating results for the quarter as if the quarter were a separate reporting period in and of itself, or as…

Joplin Laminating Corporation reported income before income taxes during the first three quarters, and management’s estimates of the annual effective tax rate at the end of each quarter as shown below: Quarter First Second ThirdIncome before income taxes $50,000 $40,000 $100,000Estimated annual effective tax rate 22% 25% 24% Required:Determine the income tax expense to be reported in the income statement in each of the three quarterly reports.

Joplin Laminating Corporation reported income before income taxes during the first three quarters, and management’s estimates of the annual effective tax rate at the end of each quarter as shown below:QuarterFirst Second ThirdIncome before income taxes $50,000 $40,000 $100,000Estimated annual effective tax rate 34% 30% 36%Required:Determine the income tax expense to be reported in the income statement in each of the three quarterly reports.

Answer 2

Question

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

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Answer 3

Question

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

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Answer 4

Question

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

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Answer 5

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

Answer 6

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

Answer 7

Chapter 13, Problem 13.18P

a.

To determine

Introduction: FIFO stands for First in First Out where the goods or inventories that are brought first are sold first. This method is used where goods are of perishable nature.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 when switch from FIFO to LIFO

Answer 8

a.

Expert Solution

Explanation of Solution

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	388	123	106	17	10.2
June-30	406	123	105	18	10.8
Sep − 30	428	137	119	18	10.8
20X6
Mar -31	394	127	112	15	9
June -30	416	138	119	19	11.4
Sep -30	403	123	117	6	3.6
Dec − 31	385	125	103	22	13.2

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

Answer 13

b.

To determine

Introduction: Depreciation is an expense or loss involved in using fixed assets in the process of production which has to be provided for it is done by estimating the amount to be written off from the value of asset each year. Or it could be stated as a permanent decrease in the value of a fixed asset because of normal tear and wear while using them.

To explain: The effect of a company deciding to switch from straight-line method to accelerated method of depreciation

Answer 14

b.

Expert Solution

Explanation of Solution

Accelerated depreciation refers to the use of one method from different methods of depreciation by a company, for financial accounting or tax purposes to depreciates a fixed asset in such a way that the amount of depreciation is higher than the earlier years of an asset’s life. As it is a change in accounting estimate because there will be a change in the expected future benefits derived. As per the requirement of FASB 154, this change should be accounted for during the period in which the change occurred or it should be accounted for during the period and the future periods if the change is of both current and future effects. The newly adopted method of depreciation will be used for the 3^r^d quarter on 30^t^h September and for the future periods till the useful life of the assets. In the footnote disclosure to the financial statements, the effects of change on the income from operations should be justified.

Answer 15

b.

Expert Solution

Answer 16

b.

Expert Solution

Answer 17

Expert Solution

Answer 18

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6

Answer 19

c.

To determine

Introduction: LIFO stands for Last in First Out where the goods or inventories that are brought last are sold first. This method is only used in the Unites States of America.

To prepare: A statement to show the interim financial data for 3 quarters of the year 20X7 and comparative data for 20X6 for the company deciding to change its method of accounting from completed contract method to percentage of completion method to recognize sales revenue on long term contract.

Answer 20

c.

Expert Solution

Explanation of Solution

Quarter Ended	Completed Contract	% of completion	Effects of Change
Sales	Gross Profit	Sales	Gross Profit	Sales	Gross Profit
20X7	$		$	$		$
Mar -31	80	20	60	30	(20)	10
June-30	0	0	55	30	55	30
Sep − 30	100	50	70	40	(30)	(10)
20X6
Mar -31	0	0	60	40	60	40
June -30	150	100	40	20	(110)	(80)
Sep -30	0	0	50	30	50	30
Dec − 31	60	40	50	30	(10)	(10)

The change of completed contract to the % of completion method involves the application of new method to the balance sheet of previous period and the adjustments to all the subsequent annual and interim financial statements by applying the new method.

Statement showing the net earnings after deducting the tax rate of 40 %.

Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings from operations before tax	Net Earnings
20X7	$		$	$	$
Mar -31	368	143	106	37	22.2
June-30	461	165	105	60	36
Sep − 30	398	141	119	22	13.2
20X6
Mar -31	454	179	112	67	40.2
June -30	306	71	119	48	(28.8)
Sep -30	453	178	117	(61)	36.6
Dec − 31	375	124	103	21	12.6