Concept explainers
Communication
The city of .Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each derailment. The annual budget is divided equally among the 12 months to provide a constant monthly italic budget. On June 30, all unspent budgeted monies for the budget year from the various city departments must be "returned" to the General Fund. Thus, if department heads tail to use the It budget by year-end, they will lose it. A budget analyst prepared a chart of the difference between the monthly actual and budgeted amounts for all departments in a recent fiscal year. The chart wav as follows:
Write a memo to Stacy Poindexter, the city manager, interpreting the chart and suggesting improvements to the budgeting system.
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Financial & Managerial Accounting
- 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 the 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 10,000,000. 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 that an 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 continue 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 wouldn't be surprised if we need to expand the size of our new factory building in 20Y9 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 20Y8, 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 cash flow while we expend the 4,000,000 of construction costs in 20Y6 and 6,000,000 in 20Y7 on the portion of the new factory building scheduled to be completed in 20Y9. Use this interview information to prepare a capital expenditures budget for Omicron Inc. for the years 20Y6-20Y9.arrow_forwardA. Discuss the purpose of the cash budget. B. If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?arrow_forwardRelevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in January for $10,000 and $4,500 in May. Dividends of $4,500 were paid in February. The beginning cash balance was $60,359 and a required minimum cash balance is $59,000. Use this information to prepare a cash budget for the first two quarters of the yeararrow_forward
- Communication The city of Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each department. The annual budget is divided by 12 months to provide a constant monthly static budget. On June 30, all unspent budgeted monies for the budget year from the various city departments must be returned to the General Fund. Thus, if department heads fail to use their budget by year-end, they will lose it. A budget analyst prepared a chart of the difference between the monthly actual and budgeted amounts for the recent fiscal year. The chart was as follows: Write a memo to Stacy Collins, the city manager, interpreting the chart and suggesting improvements to the budgeting system.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_forwardIntegrity and evaluating budgeting systems The city of Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each department. The annual budget is divided by 12 months to provide a constant monthly static budget. On June 30, all unspent budgeted monies for the budget year from the various city departments must be returned to the General Fund. Thus, if department heads fail to use their budget by year-end, they will lose it. A budget analyst prepared a chart of the difference between the monthly actual and budgeted amounts for the recent fiscal year. The chart was as follows: a. Interpret the chart. b. Suggest an improvement in the budget system.arrow_forward
- The General Fund for Nisland has the following budget for the current year: Estimated Revenues$4,500,000 Appropriations$5,200,000 Estimated other financing sources$800,000 Estimated other financing uses$75,000 During the year, the actual results were: Revenues$4,300,000 Expenditures$5,150,000 Other financing sources$850,000 Other financing uses$70,000 Required: Prepare the Closing Entries for Nisland. Does it need a record for budgetary / encumbrances first and then the actual cost? DO NOT GIVE SOLUTION IN IMAGE FORMATarrow_forwardThe city council of Temecula approved the 2013 budget as follows: Budgeted 2013 revenues from: Property taxes $6,000,000 Sales taxes $2,000,000 Appropriations for 2013: Salaries $5,600,000 Materials $2,200,000 Equipment $125,000 Required: Prepare the general journal entry necessary to initially record the budget on 1/1/13 Date Account Debit Creditarrow_forwardquestion 19 A county general fund budget includes budgeted revenues of $600 and budgeted expenditures of $595. Actual revenues for the year were $610. To close the Estimated Revenues account at the end of the year a. Debit Estimated Revenues $10 b. Credit Estimated Revenue $10 c. Debit Estimated Revenues $600 d. Credit Estimated Revenues $600 Question 20 Hill City uses encumbrance accounting to control expenditures. However, it charges the cost of outstanding purchase commitments to expenditures in the year they are received, not in the year they are ordered. If Hill City had $5,000 of purchase commitments outstanding at the end of Year 1 and received those goods during Year 2 at a cost of $4,900, what would be the impact on total Fund Balance for Year 2? a. Total Fund Balance at the end of Year 2 would be $4,900 less than at the end of Year 1. b. Total Fund Balance at the end of Year 2 would be $100 less than at the end of Year 1. c. Total Fund Balance at the end of Year 2 would be…arrow_forward
- 1-Assume that a city approves the following budget for the year: Estimated revenues . . . . . . . . . . . . . . . . . . . . . . $136,540 Estimated other financing sources. . .. . . . . . . . . 32,000 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . (148,890) Net change in fund balance . . . . . . . . . . . . . . . . $ 19,650 Required: Prepare the journal entry to record the budget.arrow_forwardThe finance director of the Bethandy Independent School District is making preliminary estimates of the budget outlook for the General Fund for the 20x8 fiscal year. These estimates will permit the superintendent to advise the department heads properly when budget instructions and forms are distributed. She has assembled the following information: Estimated 20X7 Expected Change- 20X8 1. Revenues Property Taxes............................................................................ $2,000,000 +6% State aid....................................................................................... 1,000,000 +3% Federal grants.............................................................................. 500,000 -$40,000 Other............................................................................................ 300,000 +$10,000 $3,800,000 2. Expenditures Salaries and…arrow_forward1 The city in which you live provides its budget information in monthly budgetary control reports with each month representing 1/12th of the overall budget. You overhear several managers discussing the budget at a community meeting. You were surprised to hear that half of the managers liked this process and that the other half felt that it did not adequately match their expenses. Discuss the issues regarding the preparation of the budgets and why half of the departments liked the process and why the other half did not like the process. Complete the following: Give examples of 1 department on each side of this controversy. Can the budgeting process be made more reflective of the work actually being completed? Explain your answer.arrow_forward
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