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construction accounting
Construction Accounting And Financial Management 4th Edition Steven J. Peterson - Solutions
In Example 14-4, how did depreciation affect the cash flow for the construction company? Example 14-4 The new computer system, included in the general overhead budget, will be subject to 200% declining balance depreciation using the half-year convention and a five-year life.
What is a “What if” analysis?
What is a “Sensititive” analysis?
On what three things is equivalence based?
What are the characteristics of a uniform series of cash flows?
How do you find the interest rate at which two or more cash flows are equivalent?
What does it mean that equivalence is independent of the time period chosen to evaluate equivalence?
How does inflation affect interest rates?
How do taxes on interest affect the growth of money?
What uniform series of cash flows is equivalent to a $100,000 cash flow, 15 years from now, if the uniform cash flows occur at the end of the year for the next 15 years and the periodic interest rate is 8.5% compounded annually?
How much money needs to be set aside today to purchase a new piece of equipment in three years? The money is expected to earn 9% interest compounded annually, the marginal tax rate is 28%, and the price of the equipment is expected to increase by 3% per year. The present cost of the equipment is
How do closing costs affect the effective interest rate?
What does it mean when a bank discounts interest?
What is a sunk cost? How should sunk costs be handled when making decisions?
Determine the APY for an APR of 10% for quarterly and monthly compounding periods.
What is trade financing?
Why is it important to compare all possible mutually exclusive alternatives rather than making a series of independent decisions when using quantitative methods to analyze alternatives?
What is a study period? Why must all of the alternatives have the same study period?
What factors should you take into account when selecting the MARR?
Determine the APY for an APR of 7% for quarterly and monthly compounding periods.
Why do the NPV, the future worth, and the annual equivalent select the same alternative?
What types of investments does the payback period without interest and payback period with interest favor?
Why would one use the capital recovery with return method?
Why must you use mutually exclusive alternatives when using the rate of return method?
What are the weaknesses of the payback period without interest?
What is the advantage of using the project balance method?
Your company is looking at purchasing a dump truck at a cost of $65,000. The truck would have a useful life of five years. At the end of the fifth year the salvage value is estimated to be $10,000. The dump truck could be billed out at $68.00 per hour and costs $13.00 per hour to operate.
Your company has $100,000 to invest and has identified the following three investments: Investment A requires an initial investment of $70,000 and has an annual rate of return of 15%. Investment B requires an initial investment of $80,000 and has an annual rate of return of 21%. Investment C
Your company has $200,000 to invest and has identified the following three investments: Investment A requires an initial investment of $130,000 and has an annual rate of return of 12%. Investment B requires an initial investment of $70,000 and has an annual rate of return of 16%.Investment C
How does depreciation change the NPV?
How do capital gains affect the NPV?
How do tax credits affect the NPV?
How do taxable losses carried forward affect the NPV?
Your company needs to purchase an impact attenuator vehicle to protect crews and equipment during road striping, crack sealing, and other roadwork operations. The impact attenuator vehicle is expected to be used 700 hours per year protecting mobile operations (i.e., operations where the
Your company has purchased a new track hoe for $100,000. The track hoe can be billed out at $105.00 per hour, has an hourly operation cost of $33.00 and a useful life of four years. At the end of four years, the track hoe has a salvage value of $20,000. The operator cost is $37.00 per hour. Using a
What can a company do to reduce its workers’ compensation insurance costs?
What is general overhead?
What is the “do nothing” alternative?
Why would a lender require that a line of credit be paid off for one or two months of the year?
What is a commitment fee and how does it affect the interest rate on a line of credit?
What is a compensating balance and how does it affect the interest rate on a line of credit?
What is a good faith estimate?
What is an amortization schedule?
What is maturity matching?
What is the purpose of a subordination clause in a loan?
What is the difference between fixed and variable interest rates?
What is the difference between a secured and unsecured debt?
What is the difference between an allowance and a reimbursement? How does this difference affect labor burden?
Why are the social security and Medicare taxes paid by he employee not included in labor burden?
What are the key steps in the monitoring and controlling process?
What does it indicate when a superintendent has to write a lot of stop gap purchase orders? How would you address this issue?
What is the best way to control labor costs? What tools are discussed in the chapter that may be used to help control labor costs?
Why are equipment costs for company-owned equipment hard to predict?
What is an internal change order and how is it used?
What are some of the problems with using the CPI?
What is a project closeout audit and why should it be performed?
During the design phase, what are the steps for monitoring and controlling construction costs?
How does the method of depreciation affect financial analysis?
How does retention affect the financial ratios? What ratios does it affect?
A contractor has a contract to construct the sanitary sewer, water line, storm drain, and street lighting for a new subdivision. The contractor uses the cost codes in Figure 2-6. The original estimate for the sewer was $25,000 and a $3,200 change order has been approved to add a manhole. The
Why is labor seldom a committed cost?
What should you look for in a construction accounting system?
A contractor has a contract to remove and replace the existing landscape and sidewalks around an office building. The work includes demolition of the existing landscaping and sidewalks, importing fill and grading around the office building, constructing new concrete sidewalks, and new landscaping.
Your company has been hired to act as a construction manager for the construction of a bookstore for a fixed fee of $32,000. When the design was 90% complete, you prepared a budget for the project, which is shown in Figure 4-13. During the buyout, the subcontracts shown in Figure 4-14 were
The project in Problem 10 is expected to take 9 months to complete. The costs for the project at the end of the second month are shown in Figure 4-16. You have a meeting with project’s owner to discuss the financial status of the project. Using the committed cost worksheet from Problem 10, update
Using the chart of accounts in Figure 2-1, determine the changes to the balance sheet, income statement, job cost ledger, and equipment ledger as a result of recording over- and underbillings from Problem 12. The balance sheet from the beginning of the month had $5,716 in cos and profits in
Using the chart of accounts in Figure 2-1, determine the changes to the balance sheet, income statement, job cost ledger, and equipment ledger as a result of recording the over- and underbillings from Problem 13. The balance sheet from the beginning of the month had $1,562 in costs and profits in
What is a depreciation schedule?
How does calculating depreciation using the IRS tables, such as Table 5-6, differ from calculating depreciation using declining balance method used Example 5-3?In Table 5-6 Year 1 234 5 6 7 8 9 10 11 3 Years (%) 5 Years (%) 7 Years (%) 10 Years
Why would a company use the sum-of-the-year or declining-balance methods to calculate depreciation?
What is cost segregation? What are the advantages and disadvantages of cost segregation?
How does Section 179 of the Internal Revenue Code affect depreciation?
What are some of the reasons for using a different depreciation method or recovery period for financial purposes than is used or tax purposes?
Prepare a depreciation schedule to be used for tax purposes for a $110,000 railroad spur (track) using the 200% declining-balance method and a half-year allowances.
Obtain a chart of accounts from a local construction company. Compare and contrast the company’s chart of accounts with the chart of accounts in Figure 2-1. Does the company’s chart of accounts have any accounts that are not shown in Figure 2-1? If so, what are they and what are they used for?
What is the difference between cost reporting and cost control?
What is an overbilling and how is it used in percentage-of-completion accounting?
Committed costs are those costs the company has committed to pay and can quantity the cost. These costs may or may not have been recorded as expenses. Committed costs include fix-price subcontracts and purchase orders with set pricing.Define committed costs and provide two examples of committed
What are underbillings and how do they occur?
According to the The Surety & Fidelity Association of America, what are the warning signs that a construction company is in financial trouble?
What are the purposes of the accounting system?
What are the six key principals of internal controls and how do they protect the company’s financial resources?
Why are internal controls needed?
What are overbillings and how do they occur?
What are the different accounting ledgers used by construction companies and what are their purposes?
What is the relationship among the chart of accounts, the balance sheet, and the income statement?
An invoice is billed to 102.02.12500S. What does each component of this cost code mean?
Visit with a controller or accountant who works for a construction company. Discuss the following questions:a. What role does the accounting system play in the success of the construction company?b. What data does the accounting system collect and how is it used?c. Which of the company’s
How do he relationships between the balance sheet, in statement, job cost ledger, and equipment ledger help determine the changes made by each transaction?
Which of the transactions from this chapter result in a change in profit? What do they have in common?
Which of the transactions from this chapter result in a cash flow? What do they have in common?
Which of the transactions from this chapter result in neither a change in profit nor a cash flow? What do they have in common?
What is an underbilling and how is it used in percentage-of-completion accounting?
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