SOLUTION MANUAL
Construction Accounting and Financial Management,
4th Edition Steven J. Peterson
Chapters 1 - 18, Complete Newest Version
, CONTENTS
New to the Fourth Edition 1
Chapter 1: Construction Financial Management 2
Chapter 2: Construction Accounting Systems 4
Chapter 3: Accounting Transactions 7
Chapter 4: More Construction Accounting 23
Chapter 5: Depreciation 34
Chapter 6: Analysis of Financial Statements 50
Chapter 7: Managing Costs 58
Chapter 8: Determining Labor Burden 62
Chapter 9: Managing General Overhead Costs 65
Chapter 10: Setting Profit Margins for Bidding 67
Chapter 11: Profit Center Analysis 70
Chapter 12: Cash Flows For Construction Projects 75
Chapter 13: Projecting Income Taxes 87
Chapter 14: Cash Flows for a Construction Company 91
Chapter 15: Time Value of Money 93
Chapter 16: Financing a Company’s Financial Needs 99
Chapter 17: Making Financial Decisions 111
Chapter 18: Income Taxes and Financial Decisions 130
, New to the Fourth Edition
The major changes to the fourth edition include the following
• The business failure rate for construction companies in Chapter 1 have
beenupdated.
• Sections on cost segregation and bonus depreciation have been added to Chapter 5.
• The discussion of typical median ratios in Chapter 6 has been updated.
• A section on the monitoring and controlling process has been added to Chapter 7.
• A section on managing design-build costs has been added to Chapter 7.
• The wages, social security, and Medicare costs were updated in Chapters 8,
9,and 14.
• A weekly cash flow problem has been added to Chapter 12.
• The income tax regulations in Chapter 13 have been updated to
incorporateprovisions of The Tax Cuts and Jobs Act passed in December
2017.
• The project cash flows used to develop an annual cash flow for a construction
company have been expanded to cover the entire project (including work done
inthe prior year) and the calculation of the underbillings/overbillings has been
included in Chapter 14.
• The effects of taxes on decision has been updated in Chapter 18 to incorporate
theTax Cuts and Jobs Act.
The fInstructor’s fManual fincludes fa flist fof flearning fobjectives, finstructional fhints,
fsuggested factivities, fand fresources ffor feach fchapter. fFiles ffor fthe ffigures fand ftables
fin fthe ftextbook fare ffound fon fthe finstructor’s fwebsite. fIt fis fmy fhope fthat fthese
fresources fwill fmake fit feasier ffor fcourse finstructors fto fteach fthe fmaterial fin fa
fmeaningful fmanner. fBecause fthe fcourses fthat fuse fthis ftextbook fare fquite fdiverse, fit
fis fimpossible fto forganize fthe fchapters finto fone fbest forder. fEach finstructor fshould
fconsider fhis for fher findividual fprogram fand fdetermine fwhich fchapters fneed fto f be
ftaught fand fin fwhat forder.
Best fwishes,
Steven fJ. fPeterson, fMBA, fPE
, Chapter f1: fConstruction fFinancial fManagement
Learning fObjectives
At fthe fcompletion fof fthis fchapter fthe fstudent fshould fbe fable fto:
• Explain fwhy ffinancial fmanagement fis fso fimportant fto fa fconstruction fcompany.
• Explain fwhy ffinancial fmanagement fis fdifferent ffor fconstruction fcompanies fthan
fforfmost f other findustries.
• Understand fthat fall fmanagerial femployees ffrom fthe fowner fto fthe fcrew
fforepersonfplay fa frole fin ffinancial fmanagement fof fa fconstruction fcompany.
Instructional fHints
• Compare fa fconstruction fcompany fto fa fmanufacturing fplant. fEmphasize fthe
fdifferences fbetween fa fconstruction fcompany fand fa fmanufacturing fplant,
fparticularly: fconstruction fcompanies fbuild funique fproducts fand fthe
fequipment fisfnot fusually fstationary fat fsingle flocation. fThese fare fthe freasons
fa fconstruction fcompany fneeds fa fjob fcost fsystem fand fan fequipment fcost
fsystem.
Activities
• Invite fa ffinancial fmanager f(for fexample, fan faccountant for fgeneral fmanager)
ffrom fafconstruction fcompany fto fyour fclass fto fdiscuss ftheir frole fas fa f financial
fmanager.
• Have feach fstudent finterview fa fmanagement femployee ffor fa fconstruction
fcompany.fThe finterviews fshould finclude fowners, fproject fmanagers,
fsuperintendents, fand fforepersons. fEach fstudent fis fto ffind fout fhow fthe
femployee fcontributes fto fthe ffinancial fmanagement fof fthe fcompany. fDiscuss
ftheir ffindings fin fclass.
Instruction fResources
• The ffigures ffrom fthis fchapter fin felectronic fformat fand fPowerPoint fslides
fcan fbeffound fat fthe finstructor’s fwebsite.
• Data fon fconstruction ffailures fcan fbe fobtained ffrom fthe fSurety fInformation
fOfficef(www.sio.org).
• Current fdata fon fconstruction fcompany ffailures fcan fbe ffound fat
fhttp://www.census.gov/ces/dataproducts/bds/data_firm.html. fThe fmost
fuseful fdatafcomes ffrom freports fthat finclude fthe fsector f(e.g., fSector, fFirm fAge
Construction Accounting and Financial Management,
4th Edition Steven J. Peterson
Chapters 1 - 18, Complete Newest Version
, CONTENTS
New to the Fourth Edition 1
Chapter 1: Construction Financial Management 2
Chapter 2: Construction Accounting Systems 4
Chapter 3: Accounting Transactions 7
Chapter 4: More Construction Accounting 23
Chapter 5: Depreciation 34
Chapter 6: Analysis of Financial Statements 50
Chapter 7: Managing Costs 58
Chapter 8: Determining Labor Burden 62
Chapter 9: Managing General Overhead Costs 65
Chapter 10: Setting Profit Margins for Bidding 67
Chapter 11: Profit Center Analysis 70
Chapter 12: Cash Flows For Construction Projects 75
Chapter 13: Projecting Income Taxes 87
Chapter 14: Cash Flows for a Construction Company 91
Chapter 15: Time Value of Money 93
Chapter 16: Financing a Company’s Financial Needs 99
Chapter 17: Making Financial Decisions 111
Chapter 18: Income Taxes and Financial Decisions 130
, New to the Fourth Edition
The major changes to the fourth edition include the following
• The business failure rate for construction companies in Chapter 1 have
beenupdated.
• Sections on cost segregation and bonus depreciation have been added to Chapter 5.
• The discussion of typical median ratios in Chapter 6 has been updated.
• A section on the monitoring and controlling process has been added to Chapter 7.
• A section on managing design-build costs has been added to Chapter 7.
• The wages, social security, and Medicare costs were updated in Chapters 8,
9,and 14.
• A weekly cash flow problem has been added to Chapter 12.
• The income tax regulations in Chapter 13 have been updated to
incorporateprovisions of The Tax Cuts and Jobs Act passed in December
2017.
• The project cash flows used to develop an annual cash flow for a construction
company have been expanded to cover the entire project (including work done
inthe prior year) and the calculation of the underbillings/overbillings has been
included in Chapter 14.
• The effects of taxes on decision has been updated in Chapter 18 to incorporate
theTax Cuts and Jobs Act.
The fInstructor’s fManual fincludes fa flist fof flearning fobjectives, finstructional fhints,
fsuggested factivities, fand fresources ffor feach fchapter. fFiles ffor fthe ffigures fand ftables
fin fthe ftextbook fare ffound fon fthe finstructor’s fwebsite. fIt fis fmy fhope fthat fthese
fresources fwill fmake fit feasier ffor fcourse finstructors fto fteach fthe fmaterial fin fa
fmeaningful fmanner. fBecause fthe fcourses fthat fuse fthis ftextbook fare fquite fdiverse, fit
fis fimpossible fto forganize fthe fchapters finto fone fbest forder. fEach finstructor fshould
fconsider fhis for fher findividual fprogram fand fdetermine fwhich fchapters fneed fto f be
ftaught fand fin fwhat forder.
Best fwishes,
Steven fJ. fPeterson, fMBA, fPE
, Chapter f1: fConstruction fFinancial fManagement
Learning fObjectives
At fthe fcompletion fof fthis fchapter fthe fstudent fshould fbe fable fto:
• Explain fwhy ffinancial fmanagement fis fso fimportant fto fa fconstruction fcompany.
• Explain fwhy ffinancial fmanagement fis fdifferent ffor fconstruction fcompanies fthan
fforfmost f other findustries.
• Understand fthat fall fmanagerial femployees ffrom fthe fowner fto fthe fcrew
fforepersonfplay fa frole fin ffinancial fmanagement fof fa fconstruction fcompany.
Instructional fHints
• Compare fa fconstruction fcompany fto fa fmanufacturing fplant. fEmphasize fthe
fdifferences fbetween fa fconstruction fcompany fand fa fmanufacturing fplant,
fparticularly: fconstruction fcompanies fbuild funique fproducts fand fthe
fequipment fisfnot fusually fstationary fat fsingle flocation. fThese fare fthe freasons
fa fconstruction fcompany fneeds fa fjob fcost fsystem fand fan fequipment fcost
fsystem.
Activities
• Invite fa ffinancial fmanager f(for fexample, fan faccountant for fgeneral fmanager)
ffrom fafconstruction fcompany fto fyour fclass fto fdiscuss ftheir frole fas fa f financial
fmanager.
• Have feach fstudent finterview fa fmanagement femployee ffor fa fconstruction
fcompany.fThe finterviews fshould finclude fowners, fproject fmanagers,
fsuperintendents, fand fforepersons. fEach fstudent fis fto ffind fout fhow fthe
femployee fcontributes fto fthe ffinancial fmanagement fof fthe fcompany. fDiscuss
ftheir ffindings fin fclass.
Instruction fResources
• The ffigures ffrom fthis fchapter fin felectronic fformat fand fPowerPoint fslides
fcan fbeffound fat fthe finstructor’s fwebsite.
• Data fon fconstruction ffailures fcan fbe fobtained ffrom fthe fSurety fInformation
fOfficef(www.sio.org).
• Current fdata fon fconstruction fcompany ffailures fcan fbe ffound fat
fhttp://www.census.gov/ces/dataproducts/bds/data_firm.html. fThe fmost
fuseful fdatafcomes ffrom freports fthat finclude fthe fsector f(e.g., fSector, fFirm fAge
