(Learning Objective 2: Distinguish a capital expenditure from an immediate expense)LimeBike, located in San Mateo, California, is a startup founded in 2017. Its mission isto make shared bicycles accessible and affordable. The company has taken the basic idea ofshared bicycles and eliminated the need to return the bike to a docking station, which may notbe near the cyclist’s destination. LimeBike charges $1 per 30 minutes of riding, or $0.50 perride for students.To use LimeBike, you first use the LimeBike app to locate one of the citrus-colored bikesnear your location. Once you are at the bike, you scan the QR code on the bike or enter thebike’s plate number into the app to unlock the bike. When you are finished using the bike, youpark the bike by a bike rack or post––anywhere that is legal and visible. Once you press downthe back-wheel lock, the trip is finalized and your payment is processed by LimeBike’s app.LimeBike does not depend on government funding, making it appealing to cities with tightbudgets. In mid-2017 the company raised $12 million from investors to expand its operations.It is set to begin operating in as-of-yet undisclosed cities sometime in 2017 or 2018.Assume that LimeBike has officially begun operating its bike sharing program.1. For each of the following items, identify whether the cost of the item would be expensed orcapitalized at LimeBike:a. Customized bikes from Trek and Specializedb. Development costs of LimeBike’s app for locating, paying, and returning bikesc. Salary of the salesperson who works to get cities to adopt LimeBike’s programd. Replacement tires for bikese. Routine bike maintenance including chain lubrication, brake pad replacement, anddrivetrain cleaningf. Electricity and other utilities in the company’s administrative offices
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
(Learning Objective 2: Distinguish a capital expenditure from an immediate expense)
LimeBike, located in San Mateo, California, is a startup founded in 2017. Its mission is
to make shared bicycles accessible and affordable. The company has taken the basic idea of
shared bicycles and eliminated the need to return the bike to a docking station, which may not
be near the cyclist’s destination. LimeBike charges $1 per 30 minutes of riding, or $0.50 per
ride for students.
To use LimeBike, you first use the LimeBike app to locate one of the citrus-colored bikes
near your location. Once you are at the bike, you scan the QR code on the bike or enter the
bike’s plate number into the app to unlock the bike. When you are finished using the bike, you
park the bike by a bike rack or post––anywhere that is legal and visible. Once you press down
the back-wheel lock, the trip is finalized and your payment is processed by LimeBike’s app.
LimeBike does not depend on government funding, making it appealing to cities with tight
budgets. In mid-2017 the company raised $12 million from investors to expand its operations.
It is set to begin operating in as-of-yet undisclosed cities sometime in 2017 or 2018.
Assume that LimeBike has officially begun operating its bike sharing program.
1. For each of the following items, identify whether the cost of the item would be expensed or
capitalized at LimeBike:
a. Customized bikes from Trek and Specialized
b. Development costs of LimeBike’s app for locating, paying, and returning bikes
c. Salary of the salesperson who works to get cities to adopt LimeBike’s program
d. Replacement tires for bikes
e. Routine bike maintenance including chain lubrication, brake pad replacement, and
drivetrain cleaning
f. Electricity and other utilities in the company’s administrative offices
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