Note A: Change in Method of Accounting for Bronco Construction,Inc

question 271

Short Answer

Note A: Change in Method of Accounting for Bronco Construction,Inc.
On January 1,2016 the company changed its method of accounting for long-term construction from the completed-contract method to the percentage of completion method.The new method of accounting is considered preferable because it better reflects changes in the nature of the company's operations.Comparative financial statements have been adjusted to apply the new method retrospectively.Net income is increased by $31,000 and $20,000 in the years ended December 31,2015 and 2014,respectively.As a result of the change to the percentage-of-completion method,the current year's net income is higher by $21,000 as compared to the results obtained if the completed-contract method was still used.Construction-in-progress has been increased by $51,000 as of the beginning of the current year.The cumulative effect of the change is to increase beginning retained earnings by $51,000.The accounting change in principle is reported retrospectively.

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Definitions:

Goods And Services

Goods are tangible items that satisfy human wants and needs, while services are intangible activities or benefits that one party can offer to another.