Recognizing Percentage-of-Completion Income The chief accountant of Hammer Construction Company developed the following spreadsheet format as a means of quickly determining the amount of income to be recognized using the percentage-of-completion method of income recognition on a major housing development:

Which of the following is an example of an extraordinary item?

a. A building is destroyed by fire.

b. The company president resigns to take a job with a larger company.

c. Heavy frosts in the month of August kill the peanut crop in Georgia.

d. Computing facilities become obsolete when a new type of computer is developed.
When a change in accounting principle is adopted during a period:

a. A cumulative adjustment is included in net income in the period of the change and the new procedure is used for the entire year.

b. Prior years’ financial statements shown for comparative purposes are restated so they are consistent with the new principle.

c. Current revenues and expenses are reported under the new procedure from the date of the change to the end of the year only.

d. Revenues and expenses are reported under the new procedure at the start of the next year.
Pro forma figures are:

a. Amounts that were actually reported .

a. Complete the spreadsheet by inserting the appropriate amounts.

b. Compute the amount of income to be reported each year if the completed-contract method had been used.

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Dollar Amount of Year Contract 1 $1,200,000 Total Estimated Cost $980,000 Total Estimated Profit $220,000 Total Percent Completed Income Previously Income to Be Recognized Recognized This Period 15 $- $33,000 2345 1,200,000 900,000 35 1,200,000 940,000 50 1,200,000 970.000 90 1,200,000 961,000 100