In 2013, Sader Construction Company Ltd. applied the completed-contract method of accounting for long-term construction contracts. However in 2014, Sader discovered that the percentage-of-completion method should have been applied instead. For tax purposes, the company uses the completed-contract method and will continue this approach in the future. Sader follows ASPE, and will apply the percentage-of-completion method in 2014 and in the future. Sader applies the deferred taxes method of accounting for income taxes, and is subject to a tax rate of 30%. The appropriate information related to this change is as follows:

Instructions
(a) Calculate the net income to be reported in 2014.
(b) Provide the necessary entry(ies) in 2014 to adjust the accounting records with respect to the revenue recognition method applied in 2013.
(c) Assume that as at the end of 2014, just prior to recording the entry(ies) in part (b), Sader has a current ratio of 0.95. From the perspective of a creditor, discuss the effect of the entry(ies) in part (b) on Sader's current ratio.

Pre-Tax Income Using: 2013 2014 Percentage-of-Completion Completed-Contract Difference $200,000 220,000 $820,000 700,000 $620,000 480,000