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 dInstructor’s dManual dincludes da dlist dof dlearning dobjectives, dinstructional dhints,
dsuggested dactivities, dand dresources dfor deach dchapter. dFiles dfor dthe dfigures dand
dtables din dthe dtextbook dare dfound don dthe dinstructor’s dwebsite. dIt dis dmy dhope
dthat dthese dresources dwill dmake dit deasier dfor dcourse dinstructors dto dteach dthe
dmaterial din da dmeaningful dmanner. dBecause dthe dcourses dthat duse dthis dtextbook
dare dquite ddiverse, dit dis dimpossible dto dorganize dthe dchapters dinto done dbest dorder.
dEach dinstructor dshould dconsider dhis dor dher dindividual dprogram dand ddetermine
dwhich dchapters dneed dto d be dtaught dand din dwhat dorder.
Best dwishes,
Steven dJ. dPeterson, dMBA, dPE
, Chapter d1: dConstruction dFinancial dManagement
Learning dObjectives
At dthe dcompletion dof dthis dchapter dthe dstudent dshould dbe dable dto:
• Explain dwhy dfinancial dmanagement dis dso dimportant dto da dconstruction dcompany.
• Explain dwhy dfinancial dmanagement dis ddifferent dfor dconstruction dcompanies
dthan dfordmost d other dindustries.
• Understand dthat dall dmanagerial demployees dfrom dthe downer dto dthe dcrew
dforepersondplay da drole din dfinancial dmanagement dof da dconstruction
dcompany.
Instructional dHints
• Compare da dconstruction dcompany dto da dmanufacturing dplant. dEmphasize
dthe ddifferences dbetween da dconstruction dcompany dand da dmanufacturing
dplant, dparticularly: dconstruction dcompanies dbuild dunique dproducts dand
dthe dequipment disdnot dusually dstationary dat dsingle dlocation. dThese dare dthe
dreasons da dconstruction dcompany dneeds da djob dcost dsystem dand dan
dequipment dcost dsystem.
Activities
• Invite da dfinancial dmanager d(for dexample, dan daccountant dor dgeneral
dmanager) dfrom dadconstruction dcompany dto dyour dclass dto ddiscuss dtheir drole
das da d financial dmanager.
• Have deach dstudent dinterview da dmanagement demployee dfor da dconstruction
dcompany.dThe dinterviews dshould dinclude downers, dproject dmanagers,
dsuperintendents, dand dforepersons. dEach dstudent dis dto dfind dout dhow dthe
demployee dcontributes dto dthe dfinancial dmanagement dof dthe dcompany.
dDiscuss dtheir d findings din dclass.
Instruction dResources
• The dfigures dfrom dthis dchapter din delectronic dformat dand dPowerPoint
dslides dcan dbedfound dat dthe dinstructor’s dwebsite.
• Data don dconstruction dfailures dcan dbe dobtained dfrom dthe dSurety
dInformation dOfficed(www.sio.org).
• Current ddata don dconstruction dcompany dfailures dcan dbe dfound dat
dhttp://www.census.gov/ces/dataproducts/bds/data_firm.html. dThe dmost
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 dInstructor’s dManual dincludes da dlist dof dlearning dobjectives, dinstructional dhints,
dsuggested dactivities, dand dresources dfor deach dchapter. dFiles dfor dthe dfigures dand
dtables din dthe dtextbook dare dfound don dthe dinstructor’s dwebsite. dIt dis dmy dhope
dthat dthese dresources dwill dmake dit deasier dfor dcourse dinstructors dto dteach dthe
dmaterial din da dmeaningful dmanner. dBecause dthe dcourses dthat duse dthis dtextbook
dare dquite ddiverse, dit dis dimpossible dto dorganize dthe dchapters dinto done dbest dorder.
dEach dinstructor dshould dconsider dhis dor dher dindividual dprogram dand ddetermine
dwhich dchapters dneed dto d be dtaught dand din dwhat dorder.
Best dwishes,
Steven dJ. dPeterson, dMBA, dPE
, Chapter d1: dConstruction dFinancial dManagement
Learning dObjectives
At dthe dcompletion dof dthis dchapter dthe dstudent dshould dbe dable dto:
• Explain dwhy dfinancial dmanagement dis dso dimportant dto da dconstruction dcompany.
• Explain dwhy dfinancial dmanagement dis ddifferent dfor dconstruction dcompanies
dthan dfordmost d other dindustries.
• Understand dthat dall dmanagerial demployees dfrom dthe downer dto dthe dcrew
dforepersondplay da drole din dfinancial dmanagement dof da dconstruction
dcompany.
Instructional dHints
• Compare da dconstruction dcompany dto da dmanufacturing dplant. dEmphasize
dthe ddifferences dbetween da dconstruction dcompany dand da dmanufacturing
dplant, dparticularly: dconstruction dcompanies dbuild dunique dproducts dand
dthe dequipment disdnot dusually dstationary dat dsingle dlocation. dThese dare dthe
dreasons da dconstruction dcompany dneeds da djob dcost dsystem dand dan
dequipment dcost dsystem.
Activities
• Invite da dfinancial dmanager d(for dexample, dan daccountant dor dgeneral
dmanager) dfrom dadconstruction dcompany dto dyour dclass dto ddiscuss dtheir drole
das da d financial dmanager.
• Have deach dstudent dinterview da dmanagement demployee dfor da dconstruction
dcompany.dThe dinterviews dshould dinclude downers, dproject dmanagers,
dsuperintendents, dand dforepersons. dEach dstudent dis dto dfind dout dhow dthe
demployee dcontributes dto dthe dfinancial dmanagement dof dthe dcompany.
dDiscuss dtheir d findings din dclass.
Instruction dResources
• The dfigures dfrom dthis dchapter din delectronic dformat dand dPowerPoint
dslides dcan dbedfound dat dthe dinstructor’s dwebsite.
• Data don dconstruction dfailures dcan dbe dobtained dfrom dthe dSurety
dInformation dOfficed(www.sio.org).
• Current ddata don dconstruction dcompany dfailures dcan dbe dfound dat
dhttp://www.census.gov/ces/dataproducts/bds/data_firm.html. dThe dmost
