Completed Contract Percentage Paper

1) During 2008, a from the to the for accounting purposes but NOT for tax purposes. Gross profit figures under both methods for the past three years appear below:
Completed-ContractPercentage-of-Completion
2006$ 475,000$ 800,000
2007625,000950,000
2008700,0001,050,000
$1,800,000$2,800,000
Assuming an income tax rate of 40% for all years, the effect of this accounting change on prior periods should be reported by a credit of

A. $390,000 on the 2008 income statement
B. $600,000 on the 2008 income statement
C. $390,000 on the 2008 retained earnings statement
D. $600,000 on the 2008 retained earnings statement

48) of $51,000 were NOT recorded at December 31, 2007. Office supplies on hand of $24,000 at December 31, 2008 were erroneously treated as expense instead of supplies inventory. Neither of these errors was discovered nor corrected. The effect of these two errors would cause

A. 2007 net income and December 31, 2007 retained earnings to be understated $51,000 each
B. 2008 net income to be understated $75,000 and December 31, 2008 retained earnings to be understated $24,000
C. 2008 net income and December 31, 2008 retained earnings to be understated $24,000 each
D. 2007 net income to be overstated $27,000 and 2008 net income to be understated $24,000