Form 3115 (Rev. 11-87) Page 5
Section E. Change in Method of Reporting Income From Long-Term Contracts

Note: Also complete section D.

1 Are your contracts long-term contracts as defined in section 460? . . O Yes OO No

2 Does the change involve any pre-March 1, 1986 contracts? . . 0 Yes (© No

3 Will the taxpayer elect the simplified cost-to-cost method for determining the degree of contract + completion? O Yes (C] No

4 Isthe same method used for reporting all long-term contracts regardless of duration? . 0 Yes O No
If “No,” explain.

5 Doany of your contracts qualify for the small construction contract exception under section 460(e)? . . O Yes [1] No
If “Yes,” please provide a separate cost allocation worksheet (Section D) for such contracts.

6 Is the change in method requested for all contracts outstanding at the beginning of the tax year of change? . 0 Yes O No

If “No,” explain.

7 Doyou have either cost-plus long-term contracts or Federal long-term contracts? .
If “Yes,” please provide the information in items 2 through 6 above and complete the chart it in Section D
separately for such contracts.

8 Net adjustment required under section 481(a) ._. . . \$

Section F. Change in Method of Reporting Interest (Discount) o on installment and Other Loans
1 Change with respect to interest on 1] Installment loans, [] Commercial loans, and [1] Other loans (explain) >

2 Doany of these loans cover a period in excess of 60 months? . . 0 Yes (1 No
If “Yes,” please attach an explanation. (See Rev. Rul. 83-84 and Rev. Proc. 83- 40. _
If you wish to change from the sum of the months digits method (rule of 78's) to the economic accrual of interest method for reporting
interest (discount) under Rev. Rul. 83-84, see Rev. Procs. 84-27, 84-28, 84-29, and 84-30.
3 Amount of earned or realized interest that has not been reported on your return as of the end of the tax year
preceding the year of change. :
4 Amount of unearned or unrealized interest that has been reported o on your return as of the end of the tax year
preceding the year of change. Soe - .
5 Method of rebating in event of prepayment of loans >
Section G. Change in Method of Accounting for Depreciation Under Section 167
Applicants desiring to change their method of accounting for depreciation under section 167 must complete this section. This information

must be supplied for each account for which a change is requested. Note: Certain changes in methods of accounting for depreciation may
be filed with the Service Center where your return will be filed. See Rev. Proc. 74-11 for the methods covered.

1 Date of acquisition  .

2a Are you the original owner or the first user of the property? toe Se O Yes (J No
b If residential property, did you live in the home before renting it? . foe ee ee ee . OF Yes) OF No

3 Is depreciation claimed under Regulations section 1.167(a)-11(CLADR)? . . . . foe O Yes [J No
If “Yes,” the only changes permitted are under Regulations section 1.167(a)- 11(6X1\i. Identify these changes ‘on the tax return
for the year of change.

4 Is the property public utility property? . . O Yes (1 No

5 Location of the property (city and state) >

6

7 Cost or other basis of the property and adjustments thereto (excludeland) . . . . . 1... - 2. . [$e

8 Depreciation claimed in prior tax years (depreciation reserve)

9 Estimated salvage value . .

10 Estimated remaining useful life of the ne property > | errs
11 {f the declining balance method is requested, show percentage of straight-line rate >.
12 Other information, if any >



Form 3115 (Rev. 11-87)

Page 4

Section D. Method of Cost Allocation

Complete this section if the requested change involves either property produced, property acquired for resale, or long-term contracts.
Please check (1) the appropriate boxes in Parts | and I! showing which costs are included, under both the present and proposed methods,
in the cost of the property produced or acquired for resale under section 263A and allocated to long-term contracts under section 460. If
any boxes are not checked, it is assumed that these costs are excluded. Please mark “N/A” in boxes for costs that do not apply to the
taxpayer. If you are presently including only a portion of a type of cost, enter “P” in the appropriate box instead of (~).

GEMM] ~sCirect and Indirect Costs (Required to be allocated)

Federal income tax purposes

Present method

Proposed method

22
23
24
25

26
27

Direct material

Direct labor.

Repairs that relate toa production, resale, or tong: -term contract activity .

Maintenance .

Utilities .

Rent. .

Indirect labor and production supervisory wages .

Indirect materials and supplies

Tools and equipment

Quality control and inspection. .

Taxes other than state, local, and foreign income taxes

Depreciation, amortization, and cost recovery allowance for equipment ‘and facilities placed in
service and not temporarily idle Se
Depletion

Administrative costs (but not including any costs of selling: or any y return on capital)

Direct or indirect costs of other administrative, service, or support function or department

Officers’ compensation (not including selling activities)

Insurance .

Employee benefits .

Research and experimental expenses s attributable to long- term contracts .

Rework labor, scrap, and spoilage .

Bidding expenses incurred in the solicitation of ‘particular contracts ultimately awarded to the
taxpayer .

Engineering and design costs (not including section 174 research and experimental expenses) .
Storage and warehousing costs including a portion of allocable general and administrative costs**.
Purchasing costs including a portion of allocable general and administrative costs .
Handling, processing, assembly, and repackaging costs including a portion of allocable general and
administrative costs . soe sone .

Interest .

Other costs (Attach a sist of such costs. )

** Resalers may distinguish between off-site and on- -site ‘storage, and are not required to capitalize
on-site storage costs. Check this box if you are a resaler allocating only off-site storage costs. _.> C]

Included (4

Included (~~)

TEM Other Costs (Not required to be allocated)

abwne

OO ND

Repairs that do not relate to a production, resale, or long-term contract activity .

Research and experimental expenses not included on line 19, Part |

Bidding expenses not included on line 21, Part!

Marketing, selling, advertising, and distribution expenses .

General and administrative costs attributable to the performance of services ; that ‘do. not directly
benefit or are not incurred by reason of a particular production, resale, or long-term contract activity .
Income taxes . :

Past service costs of pension and: annuity plans .

Cost of strikes .

Other costs (Attach a list of such costs. )

J Part 111 | Additional Information

1

2

Method of allocating indirect costs:

OO Specific identification [1 Standard cost method  C] Burden rate (attach explanation) [] Other (attach explanation)
Method of allocating service costs: 0 Direct Oo Step allocation

(1 other (explain)

Taxpayers subject to the requirements of section 263A, please check the appropriate box(es) to indicate the simplified method(s), if
any, presently used: CJ simplified resale method [1 Simplified production method [1 Simplified service cost method



Form 3115 (Rev. 11-87)
Section H. Change in Method of Accounting Not Listed Above (See Specific Instructions for Section H.)

Signature—All Filers (See instructions.)
Under penalties of perjury, | declare that | have examined this application, including accompanying schedules and statements, and to the best of my knowledge and belief, it 1s
‘true, correct, and complete. Declaration of preparer (other than applicant) 1s based on all information of which preparer has any knowledge.

Signature and title

Date

“Sign

he application

Signature of individual or firm preparing th
% US.G.P.O.: 1987- 201-993/60167



rom 9115

(Rev. November 1987)
Department of the Treasury
internal Revenue Service

Application for Change in Accounting Method

> See separate instructions.

OMB No. 1545-0152
Expires 11-30-90

Name of applicant (if joint return is filed, also give spouse's name) Identifying number (see instructions)

Address (number and street) Applicant's area code and telephone number

¢ )

District Director's office having junsdiction

City or town, state, and ZIP code

Name of person to contact (Please type or print.) Contact person's area code and telephone number

¢ )

Check one: [] Individual [J Partnership; No. of Partners _._.......[ Corporation [] $ Corporation; No. of Shareholders

1 Cooperative (Section 1381(a)) C1 Ins. Co. (Sec. 801) C1] Ins. Co. (Sec. 831) LJ Qualified Personal Service Corporation _
(J Exempt organization; Enter code section > _ (See section 448.)

Cl Other (specify) >

NOTE: Are you making an election under section 458? . Soe oe
If “Yes,” see Specific Instructions for Section H. Do not fillin Section Alf “No,” ‘you must complete Section A.

Section A. Applicable to All Filers Other Than Those Answering “Yes” to “Note” Above

. C1 Yes ([] No

la Tax year of change begins (mo., day, yr.) > and ends (mo., day, yr.) PB .----.---------------------

b Enter the 180th day of your tax year _- If this date Is earlier than date you signed this Form 3115 on page 6, see
General Instruction for “Late Applications” before proceeding any further.

2 Nature of business and principal source of income (including type of business designated on your latest income tax return) >

a [1 Overall method of accounting: from > to
If the taxpayer is requesting a change to the accrual method, see section 448, Temporary Regulations section 1 448- 1T, Rev. Proc, 85-36 and Rev. Proc. 85-37.
b (1 The accounting treatment of (identify item) >.
from (present method) » __ _ to (new method) >
Attach a separate statement providing all relevant facts, including a detailed description of your present and proposed methods.
See also item 15 of Section A on page 2 regarding the “legal basis” for the proposed change.
¢ Ifachange is requested under 3b above, check the present overall method of accounting:
CJ Accrual (€) Cash © Hybrid (Explain the overall hybrid method in detail in a separate statement.) Yes | No
d_ Is your use of your present method specifically not permitted by the Internal Revenue Code, the Income Tax Regulations, Uf
or by a decision of the U.S. Supreme Court? See sections 4, 5, and 6 of Rev. Proc. 84-74 |
e Is the requested change specifically required by the Tax Reform Act of 1986? . .
Are you currently under examination, or were you or any member of the affiliated group ‘contacted in any manner + by a
representative of the Internal Revenue Service for the purpose of scheduling an examination of your Federal tax
return(s) prior to the filing of this application, or do you have an examination under consideration by an appeals officer or Ui
before any Federal court, or is any criminal investigation pending? See sections 4 through 7 of Rev. Proc. 84-74
g Are you a taxpayer that produces property or acquires property for resale to whom section 263A applies? If item to be Mt
changed is a section 263A item, section D must be completed oo .
4a In the last 6 years have you requested permission to change or have you changed your ur accounting period, your overall ]/
method of accounting, or the accounting treatment of any item? (Affiliated group members filing a consolidated return, Mi
see item 8e on page 2.) . See Le
b If 4a is “Yes,” was a ruling letter granting p permission to make the change issued? it “Yes,” ‘and the change was made, i
attach a copy of the letter. If permission was granted, but you did not make the change, attach an explanation .
c Regardless of your response to 4a, do you or an affiliated corporation have pending any accounting method or period Mh
ruling or technical advice request in the National Office? oe .
d If 4cis “Yes,” indicate the type of request (method, period, etc.) and the specific issue involved in each n request >

5 If engaged in a business or profession: a Enter your taxable income or (loss)* from operations for tax purposes for the five (5) tax
years preceding the year of change: (See Specific Instructions for Section A.)

1st preceding 2nd preceding 3rd preceding 4th preceding 5th preceding
$ $ Ls $ $ _

b Enter the amount of net operating loss to be carried over to the year of change, if any $

¢ Amount of general business credit carryover to year of change, if any . . Soe $

d Other credit carryover, if any. (Identify) > $

*Individuals enter net profit or (loss) from business; partnerships enter ordinary income or (loss), members of an affiliated group filing a consolidated return, see item 8b on page 2.
Form 3115 (Rev. 11-87)

For Paperwork Reduction Act Notice, see separate instructions.


Form 3115 (Rev. 11-87) Page 2

6

7a

o

8a

o

o

a

9a

o

10

11

12
13

14

15

Gross receipts for the three (3) tax years preceding the year of change. (See Specific Instructions for Section A.)

1st preceaing 2nd preceding 3d preceding
yeotended mo. ye yesrended: oye yearended' to yt
$ $ $ | Yes | No

Do you have more than one trade or business? .

If 7a 1s “Yes,” do you account for each trade or business separately? If “Yes,” see Specific Instructions for Section A for |
additional information that must be provided

\s applicant a member of an affiliated group filing a consolidated return for the tax year of change? .
If 8a is "Yes," state parent corporation's name, identifying number, address, tax year, and Service Center where return
1s filed, and provide the information requested in item 5 on a consolidated basis P _

If 8a is ‘‘Yes,”’ do all other members of the affiliated group employ the method of accounting for which the change 1s requested?
If'No,” explain ..... 22.222 2-2-2 eee eee eee eee ee enn nn ee
If 8a is “Yes,” are any of the items involved in the calculation of the net section 481(a) adjustment attributable to
transactions between members of the affiliated group? If “Yes,” attach explanation . .
If 8a 1s “Yes,” provide the information requested in items 4a, 4b, 4c, and 4d for each member of the affiliated group.

Is applicant a member of an affiliated group not filing a consolidated return for the tax year of change?

If 9a is “Yes,” are any of the items involved in the calculation of the net section 481(a) adjustment attributable to Yi
transactions between members of the affiliated group or other related parties? If “Yes,” attach explanation

If change Is granted, will the new method be used for financial reporting purposes? .

If “No,” attach an explanation. Such explanation should include a discussion of whether your new method of accounting
conforms to generally accepted accounting principles and why it will clearly reflect income.

Enter the net section 481(a) adjustment for the | Atthe beginning of the |Atthe beginning of the __j At the beginning of the _ At the beginning of the
year of change, and the net section 481(a) | yearofchangeended, | Ist preceding year ended, 2nd preceding year ended, | 3rd preceding year ended,
adjustment that would have been required if the | enter'mo. yr enter:mo. yr enter:mo, yt enter:mo. yf

requested change had been made for each of the 3
tax years preceding the year of change. (See
Specific Instructions for Section A.) .. $ $ $ $

Has net adjustment under section 481(a) for the year of change been reduced in any way by a pre-1954 amount?
Number of tax years present method has been used for which the change 1s requested in item 3a or 3b. (See Specific
Instructions for Section A.) > _
Has your present method been designated by a Rev. Rul. or Rev. Proc. more than 2 years before ° fling this form as a Ys
change in method of accounting to which section 5.12(2) of Rev. Proc. 84-74 applies?
State the reason(s) including the legal basis (statutes, regulation, published rulings, etc.) why y you believe approval to make this
change should be granted. See section 7 of Rev. Proc. 84-74.

Section B-1. Change in Overall Method of Accounting

1

The following amounts should be stated as of the end of the tax year preceding the year of change. If none, state ‘‘None.”’ (Although
some of the items listed below may not have been required in the computation of your taxable income due to your present method of
accounting, it is necessary that they be entered here for this form to be complete. Show the net section 481(a) adjustment
attributable to long-term contracts on line 8, Section E, page 5.) Provide on a schedule the breakdown of the individual items which
make up the “Amount” for lines 1a through 1g. See section 448, Temporary Regulations section 1.448-1T, Rev. Proc. 85-36, and
Rev. Proc. 85-37 for rules to change to the accrual method expeditiously.

Show by (L~) how treated on last year’s return:

Amount Included in income or Excluded from income or

deducted as expense not deducted as expense

a Income accrued but notreceived . . . . $
b Income received before the date on which it was earned. State
nature of income. If discount on installment loans, see Section
F on page 5. For advance payments for goods and services, see
Specific Instructions for Section B-1. > _

c Expenses accrued but not paid .
d Other (specify) >
e Prepaid expense previously deducted .
f Supplies on hand previously deducted .

gInventoryonhand. . . . . $
Inventory reported on your return $
Difference.

my
NS

hh Net section 481(a) adjustment (combine lines 1a through 1g)



Form 3115 (Rev. 11-87) Page 3

2 Nature of inventory® ___________...----------------- eee eee ee nn nn nn nen ene ee eee ee eee

3 Method used to value inventory: [] Cost 1 Cost or market, whichever slower [1] Other (attach explanation)

4 Method of identifying costs in inventory: CO Specific identification O FIFO 0 LFO

5 Have any receivables been sold in the past | 1st preceding year ended, | 2nd preceding year ended, 3rd preceding year ended,
three years? - . . . . DYes No |_enter:me. ye. enter: mo, yr. enter: mo. yr.
If “Yes,” enter the amounts sold for each of the |
three years : $ $ | $

6 Attach copies of profit and loss statement (Schedule F (Form 1040) in the case of farmers) and balance sheet, if applicable, as of the close of
the tax year preceding the year of change. State accounting method used when preparing balance sheet. If books of account are not kept,
attach copy of the business schedule provided with your Federal income tax return or return of income for that period. If amounts in 1 (Section
B-1, page 2) do not agree with those shown on profit and loss statement and balance sheet, explain on separate page.

Section B-2. Change to the Cash Method of Accounting (Farmers complete Section B-3 instead of this section.)

Note: A/so complete section B-1.
1 Provide a detailed statement describing the nature of the taxpayer's business. Describe the operations, services performed, and the
types of activities, if more than one.

2. Provide a description of the taxpayer's investment in capital items and leased equipment used in the taxpayer's trade or business, and
the relationship between these items and the services performed by the business

3 Provide a description of any inventory item (goods, the sale of which produces income) and any materials and supplies used in carrying out the business.

4 Provide the number of employees, shareholders, partners, associates, etc., and a description of their duties in carrying out the taxpayer's business.

5 Provide a schedule showing the age of receivables for the year of change and the 3 tax years preceding the year of change.

6 Provide a profit and loss statement computed on the cash receipts and disbursements method for the year of change and the 3 tax

years preceding the year of change.
Section B-3. Change in Overall Method of Reporting Income of Farmers to Cash Receipts and Disbursements Method
Note: A/so complete Section B-1.
Is the taxpayer a corporation?. . . coe re ». . .. O Yes 0 No
ls the taxpayer a partnership with a corporation as asa partner? O Yes O No
3 If either 1 or 2 is “Yes,” has the taxpayer had gross receipts of $1, 000, 000 or less | in ‘each of its tax years
beginning after 1975? fone : ..... Yes OJ No
g
Oo

ne

If “No,” attach a schedule showing w which years the taxpayer’ 's s receipts were more than n$1, 000, 000.
4a Does the taxpayer produce property with a pre-productive period of more than 2 years?
bIf 4a is “Yes,” has the taxpayer or related party made an election out of section 263A for any trade or business?
¢ If 4b is “Yes,” explain.
5 Provide the following in

Yes [] No
Yes [] No

y :
Ist preceding yr. 2nd preceding yr ‘rd preceding yr. ath preceding yr Sth preceding yr.

a Gross receipts from farming .
binventory:Crops,etc.. . . . . . _
Livestock held for sale:
Purchased
Raised
Livestock held for draft breeding,
sport, or dairy purposes:
Purchased

Raised :
Total inventory .

6 Method used to value inventory (check appropriate box):
© Cost ( Cost or market, whichever is lower [] Farmprice [1 Unitlivestock price [1] Other (explain on separate page)
Section C. Change in Method of Valuing Inventories. (See Specific Instructions for Section C.)

Note: Also complete Section D.
1 Description of inventory goods being changed >
Description of inventory (if any) not being changed >
3 Present method of identifying costs in inventory: (1 Specific identification CI FIFO O LIFO
If “LIFO,” attach copy of Form 970 adopting that method and copies of any Forms 970 filed to extend the use of the method.
4 Present method used to value inventory: [] Cost £1 Cost or market, whichever is lower L] Retail cost
0 Retail, lower of cost or market [] Other (attach explanation)
5 Show method and value of the inventories being changed at the end of the tax year preceding the year of change under:
a Present method P .. -{$

b Proposed method >» . I$
c If changing to cost m ‘LIFO for identifying costs? hoe ee wee ee OD Yes OO No

6 Attach the computation used to arrive at the section 481 adjustment.