Chapter 21, Problem 21.2E

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)

1. a. Prepare the journal entry required to record the accounting change on January 1, 2018.
2. 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.”