i.	Long-term contracts: Hatcher Company used the completed contract method for revenue recognition in 2018. Management now believes that the percentage of completion method would be better. Income under the completed contract method for 2018 was $3,800,000 and for 2019 it was $4,100,000. If the percentage of completion method had been used, the incomes would have been $4,900,000 (2018) and $3,500,000 (2019).
ii .	Accounts receivable: The accounts receivable on December 31, 2018 included a $50,000 account which was not provided for but subsequently was written off during 2019 as the customer went bankrupt after the issuance of the financial statements. Hatcher Company would like to adjust 2018 for this oversight as it sees this as an error.
iii.	Machine depreciation: Hatcher Company has one huge machine that cost $1,000,000 and was depreciated over an estimated useful life of 10 years. Upon reviewing the manufacturer's reports in 2019, management now firmly believes the machine will last a total of 15 years from date of purchase. They would like to change last year's deprecation charge based on this analysis. Depreciation expense of $100,000 has been recorded for 2019.
iv.	Building depreciation: The company's building (cost $5,000,000, estimated salvage value $0, useful life 20 years) was depreciated last year using the 10% declining-balance method. The company and auditor now agree that the straight-line method would be a more appropriate method to use. A depreciation provision of $450,000 has been made for 2019.
v.	Inventories: The accountant last year failed to apply the lower of cost or net realizable value to ending inventory. Upon review, the inventory balance for last year should have been reduced by $120,000. The closing inventory allowance for this year-end should be $420,000. No entry has been made for this matter.
vi.	Warranties: Hatcher Company does not accrue for warranties; rather it records the warranty expense when amounts are paid. Hatcher provides a one-year warranty for defective goods. Payments to satisfy warranty claims in 2018 were $100,000 and $310,000 in 2019. Out of the $310,000 paid in 2019, $110,000 related to 2018 sales. A reasonable estimate of warranties payable at the end of 2019 is $245,000.

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Requirement b. Assume that management of Hatcher Company agrees with your recommendations. Prepare the Begin by preparing the corrected statement of comprehensive income for 2018, and then prepare the corrected sta 2018 as 2019 as 2019 as amended amended 2018 as originally reported $ 3,800,000 (100,000) 50000 Long-term contract income Other income (loss) Bad debt expense Depreciation expense-machine Depreciation expense-building Inventory write-down Warranty expense Income before taxes (450,000) (100,000) (500,000) 0 originally reported 4,100,000 (150,000) (500,000) (100,000) (450,000) 0 (310,000) (100,000) i. Long-term contracts: Hatcher Company used the completed contract method for revenue recognition in 2018. Management now believes that the percentage of completion method would be better. Income under the completed contract method for 2018 was $3,800,000 and for 2019 it was $4,100,000. If the percentage of completion method had been used, the incomes would have been $4,900,000 (2018) and $3,500,000 (2019). ii. Accounts receivable: The accounts receivable on December 31, 2018 included a $50,000 account which was not provided for but subsequently was written off during 2019 as the customer went bankrupt after the issuance of the financial statements. Hatcher Company would like to adjust 2018 for this oversight as it sees this as an error. iii. Machine depreciation: Hatcher Company has one huge machine that cost $1,000,000 and was depreciated over an estimated useful life of 10 years. Upon reviewing the manufacturer's reports in 2019, management now firmly believes the machine will last a total of 15 years from date of purchase. They would like to change last year's deprecation charge based on this analysis. Depreciation expense of $100,000 has been recorded for 2019. iv. Building depreciation: The company's building (cost $5,000,000, estimated salvage value $0, useful life 20 years) was depreciated last year using the 10% declining-balance method. The company and auditor now agree that the straight-line method would be a more appropriate method to use. A depreciation provision of $450,000 has been made for 2019. v. Inventories: The accountant last year failed to apply the lower of cost or net realizable value to ending inventory. Upon review, the inventory balance for last year should have been reduced by $120,000. The closing inventory allowance for this year-end should be $420,000. No entry has been made for this matter. vi. Warranties: Hatcher Company does not accrue for warranties; rather it records the warranty expense when amounts are paid. Hatcher provides a one-year warranty for defective goods. Payments to satisfy warranty claims in 2018 were $100,000 and $310,000 in 2019. Out of the $310,000 paid in 2019, $110,000 related to 2018 sales. A reasonable estimate of warranties payable at the end of 2019 is $245,000 2,550,000 (765,000) 2,590,000 (777,000) Income taxes (at 30%) $ 1,785,000 $ 1,813,000 Net income 2018 2019 $ Long-term contract income Other income (loss) Bad debt expense Depreciation expense-machine Depreciation expense-building Warranty expense Income before taxes Income taxes (at 30%) 3,800,000 $4,100,000 (100,000) (150,000) (450,000) (500,000) (100,000) (100,000) (500,000) (450,000) (100,000) (310,000) 2,550,000 (765,000) 2,590,000 (777,000) $ 1,785,000 $ 1,813,000 Net income