Banko Company used the cost recovery method of accounting since it began operations in 2016. In 2019, management decided to adopt the percentage of completion method. 201620172018Revenue from completed contractsCost of completed contracts25,000,000 42,000,000 40,000,00018,000,000 29,000,000 28,000,0007,000,000 13,000,000 12,000,000Income from operationsCasualty loss00(2,000,000)Income7,000,00013,000,00010,000,000Analysis of the accounting records disclosed the following income by contracts using thepercentage of completion method.201620172018Contract 17,000,000Contract 25,000,0008,000,000Contract 33,000,0007,000,0002,000,000Contract 41,000,0006,000,000Contract 5(1,000,000)What amount of pretax cumulative effect of change in accounting policy should be reported inthe statement of retained earnings for 2019?

Percentage of completed method: Under this method, the revenues and expenses are reported…

Answered: Banko Company used the cost recovery…

Banko Company used the cost recovery method of accounting since it began operations in 2016. In 2019, management decided to adopt the percentage of completion method.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Banko Company used the cost recovery method of accounting since it began operations in 2016. In 2019, management decided to adopt the percentage of completion method.

2016
2017
2018
Revenue from completed contracts
Cost of completed contracts
25,000,000 42,000,000 40,000,000
18,000,000 29,000,000 28,000,000
7,000,000 13,000,000 12,000,000
Income from operations
Casualty loss
0
0
(2,000,000)
Income
7,000,000
13,000,000
10,000,000
Analysis of the accounting records disclosed the following income by contracts using the
percentage of completion method.
2016
2017
2018
Contract 1
7,000,000
Contract 2
5,000,000
8,000,000
Contract 3
3,000,000
7,000,000
2,000,000
Contract 4
1,000,000
6,000,000
Contract 5
(1,000,000)
What amount of pretax cumulative effect of change in accounting policy should be reported in
the statement of retained earnings for 2019?

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