Arlen Technology Solutions, Inc. adopted the percentage-of-completion method when it began operations on January 1, 2013. The company elected to change to the completed-contract method on January 1, 2015, due to a change in the size of its computer network contracts. Net income under both methods for the first three 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, 2015.

b. Prepare the footnote to disclose the change from the percentage-of-completion to the completed-contract method. Designate the note as “Change in Method of Accounting for Computer Network Contracts.”

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Net Income Percentage of Completed Completion Year Ended Contract December 31, 2013 S168,000 $147,000 December 31, 2014 112,000 98,000 December 31, 2015 231,000 210,000