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 sInstructor’s sManual sincludes sa slist sof slearning sobjectives, sinstructional shints,
ssuggested sactivities, sand sresources sfor seach schapter. sFiles sfor sthe sfigures sand
stables sin sthe stextbook sare sfound son sthe sinstructor’s swebsite. sIt sis smy shope sthat
sthese sresources swill smake sit seasier sfor scourse sinstructors sto steach sthe smaterial sin
sa smeaningful smanner. sBecause sthe scourses sthat suse sthis stextbook sare squite
sdiverse, sit sis simpossible sto sorganize sthe schapters sinto sone sbest sorder. sEach
sinstructor sshould sconsider shis sor sher sindividual sprogram sand sdetermine swhich
schapters sneed sto s be staught sand sin swhat sorder.
Best swishes,
Steven sJ. sPeterson, sMBA, sPE
, Chapter s1: sConstruction sFinancial sManagement
Learning sObjectives
At sthe scompletion sof sthis schapter sthe sstudent sshould sbe sable sto:
• Explain swhy sfinancial smanagement sis sso simportant sto sa sconstruction scompany.
• Explain swhy sfinancial smanagement sis sdifferent sfor sconstruction scompanies
sthan sforsmost s other sindustries.
• Understand sthat sall smanagerial semployees sfrom sthe sowner sto sthe screw
sforepersonsplay sa srole sin sfinancial smanagement sof sa sconstruction scompany.
Instructional sHints
• Compare sa sconstruction scompany sto sa smanufacturing splant. sEmphasize sthe
sdifferences sbetween sa sconstruction scompany sand sa smanufacturing splant,
sparticularly: sconstruction scompanies sbuild sunique sproducts sand sthe
sequipment sissnot susually sstationary sat ssingle slocation. sThese sare sthe
sreasons sa sconstruction scompany sneeds sa sjob scost ssystem sand san
sequipment scost ssystem.
Activities
• Invite sa sfinancial smanager s(for sexample, san saccountant sor sgeneral smanager)
sfrom sasconstruction scompany sto syour sclass sto sdiscuss stheir srole sas sa s financial
smanager.
• Have seach sstudent sinterview sa smanagement semployee sfor sa sconstruction
scompany.sThe sinterviews sshould sinclude sowners, sproject smanagers,
ssuperintendents, sand sforepersons. sEach sstudent sis sto sfind sout show sthe
semployee scontributes sto sthe sfinancial smanagement sof sthe scompany. sDiscuss
stheir s findings sin sclass.
Instruction sResources
• The sfigures sfrom sthis schapter sin selectronic sformat sand sPowerPoint sslides
scan sbesfound sat sthe sinstructor’s swebsite.
• Data son sconstruction sfailures scan sbe sobtained sfrom sthe sSurety sInformation
sOffices(www.sio.org).
• Current sdata son sconstruction scompany sfailures scan sbe sfound sat
shttp://www.census.gov/ces/dataproducts/bds/data_firm.html. sThe smost
suseful sdatascomes sfrom sreports sthat sinclude sthe ssector s(e.g., sSector, sFirm
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 sInstructor’s sManual sincludes sa slist sof slearning sobjectives, sinstructional shints,
ssuggested sactivities, sand sresources sfor seach schapter. sFiles sfor sthe sfigures sand
stables sin sthe stextbook sare sfound son sthe sinstructor’s swebsite. sIt sis smy shope sthat
sthese sresources swill smake sit seasier sfor scourse sinstructors sto steach sthe smaterial sin
sa smeaningful smanner. sBecause sthe scourses sthat suse sthis stextbook sare squite
sdiverse, sit sis simpossible sto sorganize sthe schapters sinto sone sbest sorder. sEach
sinstructor sshould sconsider shis sor sher sindividual sprogram sand sdetermine swhich
schapters sneed sto s be staught sand sin swhat sorder.
Best swishes,
Steven sJ. sPeterson, sMBA, sPE
, Chapter s1: sConstruction sFinancial sManagement
Learning sObjectives
At sthe scompletion sof sthis schapter sthe sstudent sshould sbe sable sto:
• Explain swhy sfinancial smanagement sis sso simportant sto sa sconstruction scompany.
• Explain swhy sfinancial smanagement sis sdifferent sfor sconstruction scompanies
sthan sforsmost s other sindustries.
• Understand sthat sall smanagerial semployees sfrom sthe sowner sto sthe screw
sforepersonsplay sa srole sin sfinancial smanagement sof sa sconstruction scompany.
Instructional sHints
• Compare sa sconstruction scompany sto sa smanufacturing splant. sEmphasize sthe
sdifferences sbetween sa sconstruction scompany sand sa smanufacturing splant,
sparticularly: sconstruction scompanies sbuild sunique sproducts sand sthe
sequipment sissnot susually sstationary sat ssingle slocation. sThese sare sthe
sreasons sa sconstruction scompany sneeds sa sjob scost ssystem sand san
sequipment scost ssystem.
Activities
• Invite sa sfinancial smanager s(for sexample, san saccountant sor sgeneral smanager)
sfrom sasconstruction scompany sto syour sclass sto sdiscuss stheir srole sas sa s financial
smanager.
• Have seach sstudent sinterview sa smanagement semployee sfor sa sconstruction
scompany.sThe sinterviews sshould sinclude sowners, sproject smanagers,
ssuperintendents, sand sforepersons. sEach sstudent sis sto sfind sout show sthe
semployee scontributes sto sthe sfinancial smanagement sof sthe scompany. sDiscuss
stheir s findings sin sclass.
Instruction sResources
• The sfigures sfrom sthis schapter sin selectronic sformat sand sPowerPoint sslides
scan sbesfound sat sthe sinstructor’s swebsite.
• Data son sconstruction sfailures scan sbe sobtained sfrom sthe sSurety sInformation
sOffices(www.sio.org).
• Current sdata son sconstruction scompany sfailures scan sbe sfound sat
shttp://www.census.gov/ces/dataproducts/bds/data_firm.html. sThe smost
suseful sdatascomes sfrom sreports sthat sinclude sthe ssector s(e.g., sSector, sFirm
