What is the proper accounting treatment

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Question: Before 2014, Jefferson Corporation properly accounted for its income from long-term construction contracts on the completed-contract basis. However, early in 2014 to better measure income earned on their long-term construction contracts and be consistent with their competitors, Jefferson changed to the percentage-of-completion basis. Income for 2014 has been recorded using the percentage-of-completion method. The following information is available for your review: Pretax Income Pretax Income Completed-Contract Percentage-of-Completion Prior to 2014 $330,000 $425,000 2014 $105,000 $175,000

a) Is this a change in accounting principle, a change in accounting estimate or an error in the financial statement?

b) What is the proper accounting treatment for this situation? Cite the authoritative guidance.

Reference no: EM131540063

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