KLB Corp., a private company, has used the completed-contract method to account for its longterm construction contracts since its inception in 20X3. On 1 January 20X7, management decided to change to the percentage-of-completion method to better reflect operating activities and conform to industry norms. Completed contract was used for income tax purposes and will continue to be used for income tax purposes in the future. The income tax rate is 25%. The following information has been assembled:

Required:
1. Identify the type of accounting change involved. Which approach should be used— retrospective with full restatement, retrospective with limited restatement, or prospective without restatement? Explain.
2. Give the entry to appropriately reflect the accounting change in 20X7, the year of the change.
3. Restate the 20X7 retained earnings section of the statement of changes in equity, including the 20X6 comparative figures.
4. Assume that only the opening balance in 20X7 can be restated and that the cumulative effect cannot be allocated to individual years. Recast the 20X7 comparative retained earnings section of the statements of changes in equity accordingly.
5. Assume that no balances can be restated. Should the change be made in 20X7? Explain.

Year Ended 31 December: Net income, as reported CC income, included in above PC income, as calculated Opening retained earnings Dividends 20X3 20X4 20X5 20X6 $100,000 $120,000 $150,000 $140,000 60,000 0 120,000 65,000 50,000 40,000 90,000 190,000 320,000 20,000 20,000 20,000 190,000 320,000 440,000 0 40,000 0 10,000 90,000 Closing retained earnings *Includes PC Income, not CC Income, In earnings. 20X7 160,000* 0 75,000 440,000 20,000 580,000