Concept explainers
Capital expenditures budget
On January 1, 2016, the controller of Omicron Inc. is planning capital expenditures for the years 2016-2019. The following interviews helped the controller collect the necessary information for the capital expenditures budget:
Director of Facilities: A construction contract was signed in late 2015 for the construction of a new factory building at a contract cost of $ 10,000,000. The construction is scheduled to begin in 2016 and be completed in 2017.
Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $ 1 .5 million in equipment in late 2017. I expect that an additional $200,000 will be needed early in the following year (2018) to test and install the equipment before we can begin production. If sales continue to grow, I expect we'll need to invest another $1,000,000 in equipment in 2019.
Chief Operating Officer: We have really been growing lately. I wouldn't be surprised if we need to expand the size of our new factory building in 2019 by at least 35%. 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 2018, once the factory is up and running, we should equip the whole facility with wireless technology. I think it would cost us $800,000 today to install the technology. However, prices have been dropping by 25% per year, so it should be less expensive at a later date.
Chief Financial Officer: I am excited about our long-term prospects. My only short-term concern is managing our
Use this interview information to prepare a capital expenditures budget for Omicron Inc. for the years 2016-2019.
Want to see the full answer?
Check out a sample textbook solutionChapter 22 Solutions
Accounting (Text Only)
- Capital expenditures budget On August 1, 20Y4. the controller of Handy Dan Tools Inc. is planning capital expenditures for the years 20Y5-20Y8. 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 $9,000,000. The construction is scheduled to begin in 20Y5 and completed in 20Y6. Vice President of Manufacturing: Once the new factor)' building is finished, we plan to purchase $3-6 million in equipment in late 20Y6. I expect that an additional $500,000 will lx-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 half million 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 20YS by at least 25%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, 1 would expect the cost of the expansion to Ik- 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 factor)' 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 10% 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 $5,000,000 of construction costs on the portion of the new factor)' building scheduled to be completed in 20Y5. Use the interview information above to prepare a capital expenditures budget for Handy Dan Tools Inc. for the years 20Y5-20Y8.arrow_forwardagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?inprogress=true to eBook Capital Expenditures Budget On January 1, 20Y6, the controller of Omicron Inc. is planning capital expenditures for the years 20Y6-20Y9. The following interviews helped th controller collect the necessary information for the capital expenditures budget: Director of Facilities: A construction contract was signed in late 20Y5 for the construction of a new factory building at a contract cost of $10,000, The construction is scheduled to begin in 20Y6 and be completed in 20Y9. Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in late 20Y7. I expect th additional $200,000 will be needed early in the following year (20Y8) to test and install the equipment before we can begin production. If sales cc to grow, I expect we'll need to invest another $1,000,000 in equipment in 20Y9. Chief Operating Officer: We have really been growing lately. I…arrow_forwardPrinting Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2024 and budgeted balance sheet at April 30, 2024. The March 31, 2024, balance sheet follows: As Tune Printing Supply's controller, you have assembled the following additional information: a. April dividends of $6,000 were declared and paid. b. April capital expenditures of $16,200 budgeted for cash purchase of equipment. c. April depreciation expense, $500. d. Cost of goods sold, 45% of sales. e. Desired ending inventory for April is $22,800. f. April selling and administrative expenses include salaries of $32,000, 30% of which will be paid in cash and the remainder paid next month. g. Additional April selling and administrative expenses also include miscellaneous expenses of 15% of sales, all paid in April. h. April budgeted sales, $86,000, 50% collected in April and 50% in May. i. April…arrow_forward
- Printing Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2024 and budgeted balance sheet at April 30, 2024. The March 31, 2024, balance sheet follows: As Tune Printing Supply's controller, you have assembled the following additional information: a. April dividends of $6,000 were declared and paid. b. April capital expenditures of $16,200 budgeted for cash purchase of equipment. c. April depreciation expense, $500. d. Cost of goods sold, 45% of sales. e. Desired ending inventory for April is $22,800. f. April selling and administrative expenses include salaries of $32,000, 30% of which will be paid in cash and the remainder paid next month. g. Additional April selling and administrative expenses also include miscellaneous expenses of 15% of sales, all paid in April. h. April budgeted sales, $86,000, 50% collected in April and 50% in May. i. April…arrow_forwardTune Printing Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2024 and budgeted balance sheet at April 30, 2024. The March 31, 2024, balance sheet follows: As Tune Printing Supply's controller, you have assembled the following additional information: a. April dividends of $6,000 were declared and paid. b. April capital expenditures of $16,200 budgeted for cash purchase of equipment. c. April depreciation expense, $500. d. Cost of goods sold, 45% of sales. e. Desired ending inventory for April is $22,800. f. April selling and administrative expenses include salaries of $32,000, 30% of which will be paid in cash and the remainder paid next month. g. Additional April selling and administrative expenses also include miscellaneous expenses of 15% of sales, all paid in April. h. April budgeted sales, $86,000, 50% collected in April and 50% in May. i. April cash payments of…arrow_forwardRelevant data from the operating budget of The Framers are: Other data: Capital assets were sold in quarter 1 and $8,000 was collected in quarter 1 and $500 collected in quarter 2. Dividends of $500 will be paid in May The beginning cash balance was $50,000 and a required minimum cash balance is $10,000. Prepare a cash budget for the first two quarters of the year.arrow_forward
- Emmanuel Macron has the following budgeted business transactions for the month of May 2020: insurance refund received: $500; payments to be made to materials suppliers: $15,000; payments to be made to employees: $4,000; cash expected from customers: $25,000; budgeted depreciation charge on non-current assets: $800; budgeted interest paid to bank: $40; personal drawings: $2,000. At 1 May 2020, Emmanuel is budgeting an overdraft at the bank of $4,000. What is Emmanuel's budgeted cash position at the end of May 2020? $340 overdrawn $340 cash in the bank $460 cash in the bank $460 overdrawnarrow_forwardPreparing a financial budget—budgeted income statement and balance sheet Ballentine Company has the following post-closing trial balance on December 31, 2018: The company’s accounting department has gathered the following budgeting information for the first quarter of 2019: Additional information: Direct materials purchases are paid 50% in the quarter purchased and 50%, in the next quarter. Direct labor, ma following budgeted income statement nufacturing overhead selling and administrative costs, and income tax expense are paid in the quarter incurred. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements Prepare Ballentine Company’s budgeted income statement for the first quarter of 2019. Prepare Ballentine Company’s budgeted balance sheet as of March 31, 2019.arrow_forwardRequired: Compute for the following: 1. Number of units of materials needed for production in the first quarter. 2. The desired inventory of materials at the end of the budget year. 3. The number of units of materials to be purchased in the third quarter. 4. The amount of purchases in the second quarter. 5. The total amount paid for materials purchases at the end of 2023. The production budget for the year 2023 of Mahogany Corporation per quarter is given as follows: First quarter 26,000 Second quarter 32,000 Third quarter 34,000 Fourth quarter 44,000 For every one unit of its product, 5 units of materials are needed. Materials are purchased at P6 per unit. Materials inventory at the end of each quarter is maintained at 20% of next quarter’s production requirements. For the first quarter of the year 2024, it is estimated that production requirements will be 30,000 units of materials. Accounts payable at the beginning of 2023 was projected to…arrow_forward
- The controller of Optimum wishes to improve the company’s control system by preparing a monthly cash budget. The following information relates to the month ending July 31, 2021: June 30, 2021, cash balance $ 130,000 Dividends were declared on June 15* 44,000 Cash expenditures to be paid in July for operating expenses 83,600 Depreciation expense 13,000 Cash collections to be received 198,000 Merchandise purchases to be paid in cash 122,400 Equipment to be purchased for cash 47,000 Optimum wishes to maintain a minimum cash balance of 70,000 *Dividends are payable to shareholders of record on declaration date, 30 days after declaration. Required: 1. Prepare a cash budget for the month ending July 31, 2021, indicating how much, if anything, Optimum will need to borrow to meet its minimum cash requirement. (Leave no cells blank - enter "0" wherever required). The controller of Optimum wishes to improve the company’s control…arrow_forwardThe controller of Optimum wishes to improve the company’s control system by preparing a monthly cash budget. The following information relates to the month ending July 31, 2021: June 30, 2021, cash balance $ 130,000 Dividends were declared on June 15* 44,000 Cash expenditures to be paid in July for operating expenses 83,600 Depreciation expense 13,000 Cash collections to be received 198,000 Merchandise purchases to be paid in cash 122,400 Equipment to be purchased for cash 47,000 Optimum wishes to maintain a minimum cash balance of 70,000 *Dividends are payable to shareholders of record on declaration date, 30 days after declaration. Required: 1. Prepare a cash budget for the month ending July 31, 2021, indicating how much, if anything, Optimum will need to borrow to meet its minimum cash requirement. (Leave no cells blank - enter "0" wherever required). 2. Which of the following statement is true? a) The income…arrow_forwardDomino Consulting, budgeted overhead and other expenses as follows for the year ended December 31, 2023: Overhead: Rent $ 25,000 Repairs 10,000 Fuel 35,000 Maintenance 15,750 Supplies 6,100 Heat and light 20,250 Depreciation-computer 9,400 Miscellaneous 6,000 Depreciation-building 18,000 Depreciation-equipment…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTFundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College