Sheet Budgets Capital Expenditures Budget On January 1, 2012, the controler of O

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Sheet Budgets Capital Expenditures Budget On January 1, 2012, the controler of Omeron lr. ?S planing capital expendtures for the years 20Y2-20S The following interviews helped the controller collect the necessary information for the capital expenditures budget Dinector of Faoilbes: A construction contract was signed in labe 20Y1 for the construction of a new factory building at a contract cost of $10,000,000. The construction is scheduled to begin in 202 and be completed in 2012 vice President of Manufactuning: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in late 20Y3. 1 expect that an additional $200,000 wil be needed early in the following year (20Y4) to best and install the equipment before we can begin production, If sales continue to grow, 1 expect wel need to invest another $1,000,000 inequipment in 205 Chef Operating Officer: We have really been growing lately. I wouldn't be surprised if we seed to expand the size of our new factory bulding in 20VS by at least 35%. Fortunately, we expect itation to have mi mal impact on construction costs over the nest four years. 3n addition, I would expect the cost of the expansion to be proportional to the size of the expansion. ?) oecror of intrmator, snns, we need to ograde our istormation instens to wreless network technology, ma" sense to do this until after the new factory building is completed and producing product. During 204, ance the factory is up and running, we should equip the whole facility with wireless technology tink it would cost us $800,000 today to install the technology. However, prices have been dropping by 29% year, so K should be less expensive at a later date. Chiet Finandial Officer: 1 am escted abeut our long-term prospects. My only short-term concerm is managing our cash ow wie we expend the $4,000,000 of consruction costs on the portion of the new factory building scheduled to be completed in 2012 Use this interview informton to prepare a capital expendtures budgetter omkrorinc. for the years 2012-2???. Enter aa as positive Capital Expendeures Badoet Eqipment nformation systems SAMSUNG

Explanation / Answer

Working:

Building 20Y5: 35% x $10000000 = $3500000

Information systems:

Cost in 20Y2 = $800000

Cost in 20Y3 = $800000 - (25% x $800000) = $600000

Cost in 20Y4 = $600000 - (25% x $600000) = $450000

Omicron Inc. Capital Expenditures Budget For the Four Years Ending December 31, 20Y2-20Y5 20Y2 20Y3 20Y4 20Y5 Building 4000000 6000000 3500000 Equipment 1500000 200000 1000000 Information systems 450000 Total $ 4000000 7500000 650000 4500000

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