Instructions:
This week’s team paper will consist of you and your partner playing the role of the Controller of ABC Construction Company and preparing two business letters. Each letter should be about 600 – 800 words (about 2 to 3 pages, double-spaced, Times Roman 12 pt. font).
The first business letter should be addressed to Ms. Roberta Smith, Business Loan Office at Community Bank, requesting a line of credit to be able to pay construction costs that your company typically incurs early in construction projects. These construction costs include payroll, construction materials, permits, insurance, subcontractors, etc. The line of credit is needed because customer construction billings and subsequent cash collections occur more toward the end of the project completion date. Include in your letter a table to illustrate the timing difference between costs incurred and billings/cash collections. Columns for this table should include the following:
The table figures above relate to the percentage of completion YouTube example problem. Use the above table format but different figures in your example. Also, the project years should be 2020, 2021, and 2022. Be creative in providing relevant details to Ms. Roberta Smith, and indicate the requested line of credit amount and the intended use. Your goal is to persuade her to approve your line of credit loan request.
The second business letter should be addressed to Mr. George Brown, Southern University Treasurer, who awarded your company a new dormitory construction contract. The purpose of this letter is to request that the construction contract billing and payment terms be modified so that your company (ABC Construction Company) receives payments from Southern University earlier in the project. This will enable you to pay project construction costs as they are incurred. Provide figures and details to support your requested contract change. Indicate to Mr. Brown benefits to Southern University of paying for construction costs earlier in the construction period (e.g., ability for ABC Construction Company to pay subcontractors on time to help ensure timely completion of the project).
CostRevenueCash
IncurredBillingsCollections
20173,000,000 2,500,000 2,000,000
20185,000,000 4,000,000 3,000,000
20198,000,000 13,500,000 15,000,000
Totals16,000,000 20,000,000 20,000,000