SOLUTION MANUAL Construction Accounting and Financial Management, 4th Edition Steven J. Peterson Chapters 1 - 18, Complete Newest Version

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SOLUTION MANUAL bh




ConstructionAccountingandFinancialManagement,
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4thEditionStevenJ.Peterson
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Chapters1 - 18, CompleteNewest Version
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CONTENTS
New to the Fourth Edition
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Chapter 1: Construction Financial Management
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Chapter 2: Construction Accounting Systems
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Chapter 3: Accounting Transactions
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Chapter 4: More Construction Accounting
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Chapter 5: Depreciation
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Chapter 6: Analysis of Financial Statements
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Chapter 7: Managing Costs
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Chapter 8: Determining Labor Burden
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Chapter 9: Managing General Overhead Costs
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Chapter 10: Setting Profit Margins for Bidding
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Chapter 11: Profit Center Analysis
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Chapter 12: Cash Flows For Construction Projects
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Chapter 13: Projecting Income Taxes
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Chapter 14: Cash Flows for a Construction Company
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Chapter 15: Time Value of Money
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Chapter 16: Financing a Company’s Financial Needs
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Chapter 17: Making Financial Decisions
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Chapter 18: Income Taxes and Financial Decisions
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New to theFourthEdition b h bh bh h
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The major changes to the fourth edition include the following
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 The business failure rate for construction companies in Chapterj 1 have
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beenupdated.
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 Sections on cost segregation and bonus depreciation have been added to Chapter 5.b h b h b h bh b h b h b h b h bh b h b h b h




 The discussion of typical median ratios in Chapter 6 has been updated.
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 A section on the monitoring and controlling process has been added to Chapter 7.
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 A section on managing design-build costs has been added to Chapter 7.
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 The wages, social security, and Medicare costs were updated in Chapters 8,
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9,and 14.
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 A weekly cash flow problem has been added to Chapter 12.
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 The income tax regulations in Chapter 13 have been updated to
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incorporateprovisions of The Tax Cuts and Jobs Act passed in December
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2017.
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 The project cash flows used to develop an annual cash flow for a
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construction company have been expanded to cover the entire project
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(including work done inthe prior year) and the calculation of the
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underbillings/overbillingsj has been included in Chapterj 14.
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 The effects ofjtaxes on decision has been updated in Chapterj 18 to
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incorporate theTax Cuts and Jobs Act.
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The Instructor’s Manual includes a list of learning objectives, instructional hints, suggested
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activities, and resources forj each chapter. Files for the figures and tables in the textbook
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bare found on the instructor’s website. It is my hope that these resources will
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make it easier for course instructors to teach the material in a meaningful manner.
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bBecause the courses that use this textbook are quite diverse, it is impossible to
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organize the chapters into one best order. Each instructor should consider his or her
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bindividual program and determine which chapters need to be taught and in what
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order.
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Best wishes, b h




Steven J. Peterson, MBA, PE bh b h b h b h




Chapter1: ConstructionFinancialManagement bh bh h
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LearningObjectives h
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At the completion of this chapter the student should be able to:
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 Explain why financial management is so important to a construction company.
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 Explain why financial management is different for construction companies than
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formost other industries.
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 Understand that all managerial employees from the owner to the crew bh b h bh bh bh bh bh bh bh bh




forepersonplay a role in financial management ofja construction company.
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InstructionalHints h
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 Compare a construction company to a manufacturing plant. Emphasize the bh bh bh bh bh bh bh bh bh




differences between a construction company and a manufacturing plant,
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particularly: construction companies build unique products and the equipment
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bisnot usually stationary at single location. These are the reasons a
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construction company needsj a job cost system and an equipment cost system.
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Activities
 Invite a financial manager (for example, an accountant or general manager) from
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aconstruction companyto your class to discussjtheir role as a financial manager.
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 Have each student interview a management employee forj a construction
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company.The interviews should include owners, project managers,
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superintendents, and forepersons. Each student is to find out how the employee
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contributes to the financial management of the company. Discuss their
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bfindings in class.
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InstructionResources bh




 The figures from this chapter in electronic format and PowerPoint slides can
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befound at the instructor’s website.
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 Data on construction failures can be obtained from the Surety Information
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Office(www.sio.org).
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 Current data on construction company failures can be found atj
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bhttp://www.census.gov/ces/dataproducts/bds/data_firm.html. The most useful
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datacomes from reports that include the sector (e.g., Sector, Firm Age by Sector,
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and Firm Size by Sector) because construction can be separated from other
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bindustries.
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Solutionstojthe Textbook Problems bh bh bh bh




1. They are: 1) ineffective financial management systems, 2) bank line ofj
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creditsconstantly borrowed to the limits, 3) poor estimating and/or job
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cost reporting,
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4) poor project management, and 5) no comprehensive business plan.
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