Shelley Construction Began Operations in 2014 and Appropriately Used the Completed-Contract

Essay

Shelley Construction began operations in 2014 and appropriately used the completed-contract method in accounting for its long-term construction contracts. The prepared the following information:


Effective January 1, 2016, Shelley changed to the percentage-of-completion method tax reporting and can justify the change; the company's tax rate is 35%. It determines the construction and revenue expense amounts under the percentage of completion method to be:


Required:
1) How would the company account for the change?
2) Prepare the journal entries to reflect the changes.