Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
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Question
Chapter 1, Problem 1DQ
To determine
Identify the signs of financial troubles in a construction company.
Expert Solution & Answer
Explanation of Solution
Corporation: A business concern where there is a separate legal entity and are owned by shareholders are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. No personal legal liability exists among the shareholders.
The reasons for financial troubles in a construction company:
- Inefficient
financial management system. - Improper management of the projects.
- Excessive line of credits and borrowings.
- Improper estimation or poor reporting of
job cost . - Uncomprehensive or restricted business plan.
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The following items represent various types of liabilities. Identify if the following independent situations should be (a) recorded in the financial statements, (b) disclosed in a footnote in the financial statements, or (c) neither. ______ 1. A manufacturing company is sued for alleged product liability. The company’s attorney does not feel that the suit will result in liability to the company, but a loss is possible. If adversely adjudicated, the liability would be material. ______ 2. Alpha has sold products to Sparkle Jewelers, a retailer that sold the products to customers. The manufacturer’s warranty offers replacement of the product if it is found to be defective within 90 days of the sale to the consumer. Historically, 0.06% of the products are returned for replacement. ______ 3. A customer has filed a lawsuit for a minor amount against Sparkle Jewelers. Sparkle’s attorneys have reviewed the case and have found that many similar cases have never been awarded to the plaintiff.
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Chapter 1 Solutions
Construction Accounting And Financial Management (4th Edition)
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