Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting A Managerial Emphasis

Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan

15th edition

978-0133428858, 133428850, 133428702, 978-0133428704

More Books

Students also viewed these Accounting questions

Question

Will it ever be executed?

Answered: 1 week ago

Question

Does it make clear how measurements are defined?

Answered: 1 week ago

Question

How will your strategy receive approval?

Answered: 1 week ago