Case Study: Contract Changes:

JCR jets, a calendor-year company, accept a contract with a major airline to build 4 jets on January 2 ,2015. JRC accepts a fixed fee of $300million and muct complete the project within three year. JRC jets uses the percentage-of completion method of accounting. It determines percent complate using the percentage of labor hours incurred relative to expected total labor hours. Management expects that it will take 2 million labor hours to build the three jets. During 2015,JCR incurs actual cost og $112 million and estimates it will cost an additional $160 million to complete the jets. It incurred 800,000 labor hours during 2015. On January 3,2016, JCR jets agrees with its customer ti upgrade the jets. The parties agree that the fixed free for the four jets will now be $350 million. JCR estimates that this upgrade will require an additional 400,000 labor hours and additional cost of $40 million . Provide a written analysis and your conclusions of how JCR should account for this contract upgrade,using the Codification for support. Provide any necessary computation.