Arlen Technology Solutions, Inc. adopted the percentage-of-completion method when it began operations on January 1, 2020. The company elected to change to the completed-contract method on January 1, 2022, 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.

Required

a. Prepare the journal entry required to record the accounting change on January 1, 2022.

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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Year Ended December 31, 2020 December 31, 2021 December 31, 2022 Net Income Percentage of Completion $168,000 112,000 231,000 Completed Contract $147,000 98,000 210,000