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Use the following financial statement related to Lawton Builders under the percentage-of-completion and completed-contract methods to answer the questions below. Click the icon to view
Use the following financial statement related to Lawton Builders under the percentage-of-completion and completed-contract methods to answer the questions below. Click the icon to view the financial statement under the percentage-of-completion method.) Click the icon to view the financial statement under the completed-contract method.) Compute the profit margins under the percentage-of-completion and completed-contract methods each year. Comment on the differences. Compute the debt-to-equity ratios under the percentage-of-completion and completed-contract methods each year. Comment on the differences. a. b. a. Compute the profit margins under the percentage-of-completion and completed-contract methods each year. Comment on the differences. (Round your answers to on Begin by computing the profit margins under the percentage-of-completion method each year. 2022 2023 2024 Profit margins % % % Next, compute the profit margins under the completed-contract method each year. 2022 2023 2024 Profit margins % % 0 % The profit margin under the method is 0% in 2022 and 2023 as expected. Under the method, profit margin varies with estimated revenues and gross profit. Note also, under both methods, the profit margin on the contract overall is %. b. Compute the debt-to-equity ratios under the percentage-of-completion and completed-contract methods each year. Comment on the differences. (Enter your answers Begin by computing the debt-to-equity ratios under the percentage-of-completion method each year. 2022 2023 2024 Debt-to-Equity Ratio Next, compute the debt-to-equity ratios under the completed-contract method each year. 2022 2023 2024 Debt-to-Equity Ratio The debt-to-equity ratio is in 2022 under the percentage-of-completion method than the completed-contract method, as expected. In 2023, the debt-to-equity ratio is under the percentage-of-completion method as a loss is reported. In the last year of the contract, the debt-to-equity ratio is under both methods Financial Statement Financial statement Completed-Contract Method Percentage-of-Completion Method For the Year For the Year 2022 2024 2023 2024 Income Statement Information Revenue from long-term contracts Income Statement Information Revenue from long-term contracts Costs of construction $ 2022 1,420,000 $ 1,420,000 $ 6,500,000 $ 6,500,000 2,080,000 420,000 2,322,000 $ 1,420,000 2023 4,172,000 $ 6,500,000 (2,328,000) $ ) 3,506,000 420,000 3,086,000 Costs of construction $ 902,000 $ S 0 $ 0$ Gross profit Gross profit (Loss) 1,660,000 End-of-Year Balances End-of-Year Balances Balance Sheet Information Assets Balance Sheet Information Assets S 2021 2022 2023 2024 19,000,000 $ 22,700,000 $ 19,000,000 $ 20,800,000 11,200,000 13,400,000 11,200,000 11,200,000 11,200,000 11,200,000 11,200,000 10,600,000 2021 2022 2023 2024 $ 19,000,000 $ 22,700,000 $ 17,500,000 $ 20,800,000 11,200,000 11,684,000 10,480,000 11,200,000 11,200,000 10,829,000 8,060,000 10,600,000 Liabilities Liabilities Equity Equity
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