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Use the interview information above to prepare a capital expenditures budget for Handy Dan Tools Inc. for the years 20Y5-20Y8.

Use the interview information above to prepare a capital expenditures budget for Handy Dan Tools Inc. for the years 20Y5-20Y8.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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< On August 1, 20Y4, the controller of Handy Dan Tools Inc. is planning capital expenditures for the years 2015-20Y8. The controller interviewed several Handy Dan executives to collect the necessary information for the capital expenditures budget. Excerpts of the interviews are as follows: Director of Facilities: A construction contract was signed in May 20Y4 for the construction of a new factory building at a contract cost of $11,500,000. The construction is scheduled to begin in 20Y5 and completed in 20Y6. Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $5.8 million in equipment in late 20Y6. I expect that an additional $870,000 will be needed early in the following year (20Y7) to test and install the equipment before we can begin production. If sales continue to grow, I expect we'll need to invest another 500,000 in equipment in 20Y8. Vice President of Marketing: We have really been growing lately. I wouldn't be surprised if we need to expand the size of our new factory building in 2008 by at least 25%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, I would expect the cost of the expansion to be proportional to the size of the expansion. Director of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make sense to do this until after the new factory building is completed and producing product. During 20Y7, once the factory is up and running, we should equip the whole facility with wireless technology. I think it would cost us $400,000 today to install the technology. However, prices have been dropping by 11% per year, so it should be less expensive at a later date. President: I am excited about our long-term prospects. My only short-term concern is financing the $6,900,000 of construction costs on the portion of the new factory building scheduled to be completed in 2005. Use the interview information above to prepare a capital expenditures budget for Handy Dan Tools Inc. for the years 20Y5-20Y8. If an amount box does not require an entry, leave it blank. Enter all amounts as positive numbers. HANDY DAN TOOLS INC. Capital Expenditures Budget For the Four Years Ending December 31, 20Y5-20Y8 Previous Next
Transcribed Image Text:< On August 1, 20Y4, the controller of Handy Dan Tools Inc. is planning capital expenditures for the years 2015-20Y8. The controller interviewed several Handy Dan executives to collect the necessary information for the capital expenditures budget. Excerpts of the interviews are as follows: Director of Facilities: A construction contract was signed in May 20Y4 for the construction of a new factory building at a contract cost of $11,500,000. The construction is scheduled to begin in 20Y5 and completed in 20Y6. Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $5.8 million in equipment in late 20Y6. I expect that an additional $870,000 will be needed early in the following year (20Y7) to test and install the equipment before we can begin production. If sales continue to grow, I expect we'll need to invest another 500,000 in equipment in 20Y8. Vice President of Marketing: We have really been growing lately. I wouldn't be surprised if we need to expand the size of our new factory building in 2008 by at least 25%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, I would expect the cost of the expansion to be proportional to the size of the expansion. Director of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make sense to do this until after the new factory building is completed and producing product. During 20Y7, once the factory is up and running, we should equip the whole facility with wireless technology. I think it would cost us $400,000 today to install the technology. However, prices have been dropping by 11% per year, so it should be less expensive at a later date. President: I am excited about our long-term prospects. My only short-term concern is financing the $6,900,000 of construction costs on the portion of the new factory building scheduled to be completed in 2005. Use the interview information above to prepare a capital expenditures budget for Handy Dan Tools Inc. for the years 20Y5-20Y8. If an amount box does not require an entry, leave it blank. Enter all amounts as positive numbers. HANDY DAN TOOLS INC. Capital Expenditures Budget For the Four Years Ending December 31, 20Y5-20Y8 Previous Next
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