Cherokee Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2010. For tax purposes, the company employs the cost-recovery method and will continue this approach in the future.

Instructions
(a) Assuming that the tax rate is 35%, what is the amount of net income that would be reported in 2010?
(b) What entry (ies) is necessary to adjust the accounting records for the change in accountingpolicy?

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Pretax Income from: 2009 2010 Percentage-of-Completion $780,000 700,000 Cost-Recovery Difference $170,000 220,000 $610,000 480,000