Change in Accounting Principle, Long-Term Construction Contracts. Arlen Technology Solutions, Inc. adopted the percentage-of-completion method when it began operations on January 1, 2016. The company elected to change to the completed-contract method on January 1, 2018, due to a change in the size of its computer network contracts. Net income under both methods for the first 3 years of the company’s operations is presented in the following table. Ignore income tax effects.
Net Income | ||
Year Ended | Percentage of Completion | Completed Contract |
December 31, 2016 | $168,000 | $147,000 |
December 31, 2017 | 112,000 | 98,000 |
December 31, 2018 | 231,000 | 210,000 |
Required (Round to the nearest whole dollar)
- a. Prepare the
journal entry required to record the accounting change on January 1, 2018. - b. Prepare the footnote to disclose the change from the percentage-of-completion to the completed- contract method Designate the note as “Note A Change in Method of Accounting for Computer Network Contracts.”
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