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 been updated.
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
incorporate provisions 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 in the 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 the Tax Cuts and Jobs Act.
The Instructor’s Manual includes a list of learning objectives, instructional
hints, suggested activities, and resources for each chapter. Files for the
figures and tables in the textbook are found on the instructor’s website. It is
my hope that these resources will make it easier for course instructors to
teach the material in a meaningful manner. Because the courses that use this
textbook are quite diverse, it is impossible to organize the chapters into one
best order. Each instructor should consider his or her individual program and
determine which chapters need to be taught and in what order.
Best wishes,
Steven J. Peterson, MBA, PE
, Chapter i1: iConstruction iFinancial iManagement
Learning iObjectives
At ithe icompletion iof ithis ichapter ithe istudent ishould ibe iable ito:
Explain iwhy ifinancial imanagement iis iso iimportant ito ia iconstruction
icompany.
Explain iwhy ifinancial imanagement iis idifferent ifor iconstruction
icompanies ithan iforimost i other iindustries.
Understand ithat iall imanagerial iemployees ifrom ithe iowner ito ithe
icrew iforepersoniplay ia irole iin ifinancial imanagement iof ia
iconstruction icompany.
Instructional iHints
Compare ia iconstruction icompany ito ia imanufacturing iplant.
iEmphasize ithe idifferences ibetween ia iconstruction icompany iand ia
imanufacturing iplant, iparticularly: iconstruction icompanies ibuild
iunique iproducts iand ithe iequipment iisinot iusually istationary iat
isingle ilocation. iThese iare ithe ireasons ia iconstruction icompany
ineeds ia ijob icost isystem iand ian iequipment icost isystem.
Activities
Invite ia ifinancial imanager i(for iexample, ian iaccountant ior igeneral
imanager) ifrom iaiconstruction icompany ito iyour iclass ito idiscuss itheir
irole ias ia i financial imanager.
Have ieach istudent iinterview ia imanagement iemployee ifor ia
iconstruction icompany.iThe iinterviews ishould iinclude iowners, iproject
imanagers, isuperintendents, iand iforepersons. iEach istudent iis ito ifind
iout ihow ithe iemployee icontributes ito ithe ifinancial imanagement iof
ithe icompany. iDiscuss itheir i findings iin iclass.
Instruction iResources
The ifigures ifrom ithis ichapter iin ielectronic iformat iand iPowerPoint
islides ican ibeifound iat ithe iinstructor’s iwebsite.
Data ion iconstruction ifailures ican ibe iobtained ifrom ithe iSurety
iInformation iOfficei(www.sio.org).
Current idata ion iconstruction icompany ifailures ican ibe ifound iat
ihttp://www.census.gov/ces/dataproducts/bds/data_firm.html. iThe imost
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 been updated.
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
incorporate provisions 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 in the 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 the Tax Cuts and Jobs Act.
The Instructor’s Manual includes a list of learning objectives, instructional
hints, suggested activities, and resources for each chapter. Files for the
figures and tables in the textbook are found on the instructor’s website. It is
my hope that these resources will make it easier for course instructors to
teach the material in a meaningful manner. Because the courses that use this
textbook are quite diverse, it is impossible to organize the chapters into one
best order. Each instructor should consider his or her individual program and
determine which chapters need to be taught and in what order.
Best wishes,
Steven J. Peterson, MBA, PE
, Chapter i1: iConstruction iFinancial iManagement
Learning iObjectives
At ithe icompletion iof ithis ichapter ithe istudent ishould ibe iable ito:
Explain iwhy ifinancial imanagement iis iso iimportant ito ia iconstruction
icompany.
Explain iwhy ifinancial imanagement iis idifferent ifor iconstruction
icompanies ithan iforimost i other iindustries.
Understand ithat iall imanagerial iemployees ifrom ithe iowner ito ithe
icrew iforepersoniplay ia irole iin ifinancial imanagement iof ia
iconstruction icompany.
Instructional iHints
Compare ia iconstruction icompany ito ia imanufacturing iplant.
iEmphasize ithe idifferences ibetween ia iconstruction icompany iand ia
imanufacturing iplant, iparticularly: iconstruction icompanies ibuild
iunique iproducts iand ithe iequipment iisinot iusually istationary iat
isingle ilocation. iThese iare ithe ireasons ia iconstruction icompany
ineeds ia ijob icost isystem iand ian iequipment icost isystem.
Activities
Invite ia ifinancial imanager i(for iexample, ian iaccountant ior igeneral
imanager) ifrom iaiconstruction icompany ito iyour iclass ito idiscuss itheir
irole ias ia i financial imanager.
Have ieach istudent iinterview ia imanagement iemployee ifor ia
iconstruction icompany.iThe iinterviews ishould iinclude iowners, iproject
imanagers, isuperintendents, iand iforepersons. iEach istudent iis ito ifind
iout ihow ithe iemployee icontributes ito ithe ifinancial imanagement iof
ithe icompany. iDiscuss itheir i findings iin iclass.
Instruction iResources
The ifigures ifrom ithis ichapter iin ielectronic iformat iand iPowerPoint
islides ican ibeifound iat ithe iinstructor’s iwebsite.
Data ion iconstruction ifailures ican ibe iobtained ifrom ithe iSurety
iInformation iOfficei(www.sio.org).
Current idata ion iconstruction icompany ifailures ican ibe ifound iat
ihttp://www.census.gov/ces/dataproducts/bds/data_firm.html. iThe imost
