Change in Accounting Principle - Retroactive Approach

In 2017, The UC Construction Company changed from the completed-contract method to the percentage-of-completion method of accounting for long-term construction contracts. The company continued to use the completed-contract method for tax purposes. The tax rate is 30 percent. The comparative income statements issued previously (using the completed-contract method) showed the following:

	2017	2016	2015	2014
Construction revenue	$520,000	$480,000	$460,000	$350,000
Construction expenses	410,000	390,000	300,000	200,000
Income before taxes	110,000	90,000	160,000	150,000
Income tax expense	33,000	27,000	48,000	45,000
Net income	$77,000	$63,000	$112,000	$105,000

The comparative statements of retained earnings issued for the same years were:

	2017	2016	2015	2014
Retained earnings, beg.	$1,040,000	$1,007,000	$955,000	$900,000
Net income	77,000	63,000	112,000	105,000
Dividends	(35,000)	(30,000)	(60,000)	(50,000)
Retained earnings, end	$1,082,000	$1,040,000	$1,007,000	$955,0000

For years before 2014, pretax income using the completed-contract method was $350,000. Pretax income computed for the percentage-of-completion and completed-contract methods are as follows:

	Percentage
	Of	Completed		Cumulative
	Completion	Contract	Difference	Difference
Before 2014	$500,000	$350,000	$150,000	$150,000
2014	200,000	150,000	50,000	200,000
2015	150,000	160,000	(10,000)	190,000
2016	100,000	90,000	10,000	200,000
2017	110,000	100,000	10,000	210,000

Required: (answer must be typed and in good form)

Prepare comparative income statements for the four years, assuming UC Construction changed its method of construction accounting from the completed-contract method to the percentage-of-completion method in 2017.

Prepare comparative statements of retained earnings for the four years, assuming UC Construction changed its method of construction accounting from the completed-contract method to the percentage-of-completion method in 2017.

Prepare the journal entry required on UC Constructions books in 2017 to record the cumulative effect of the prior year restatement.