Use the information related to Bigelow Contractors from P8- 6 and P8- 7 to answer the following questions. Assume that Bigelow’s total assets were $ 5,000,000 and its liabilities were $ 2,000,000 at the beginning of the year.
a. Compute net income under the percentage- of- completion and completed- contract methods for each year. (Ignore income taxes.)
b. Compute the total assets, liabilities, and equity under the percentage- of- completion and completed-contract methods at the end of each year.
c. Compute the profit margins under the percentage- of- completion and completed- contract methods each year. Comment on the differences.
d. Compute the debt- to- equity ratios under the percentage- of- completion and completed- contract methods each year. Comment on the differences.