JUST one page ASAP

River County‘s Capital Budget

University of Affiliation:

Student’s Name:

River County‘s Capital Budget

This assignemnt is in regards to River County’s capital acquisition plans. An analysis of a scenario is made and a capital budget for the said items to be acquired is prepared as presented in the attached excell file. The calculations for the required components of the capital budget using Excel are clearly labeled.The primary goal of this assignment section is to explain the already prepared budget to the County Council. The following is the scenario analyzed: River County is planning several capital acquisitions for the coming year.  These include the purchase of two new garbage trucks at $150,000 each, one new bulldozer at $240,000, three new riding lawn mowers at $16,000 each, and construction of an activity center in the part for $650,000.  The expected lifetime of the various capital items is 10 years for the garbage trucks, 8 years for the bulldozer, 5 years for the lawn mowers, and 40 years for the activity center. 

Having “prepared a capital budget for the items to be acquired” (Harvard Business School, 2009), from the attached excell file, showing their estimated lifetimes, and their per unit and total costs, the budget is explained as follows.

River County Council would require approximately $1,238,000 to satisfaction full “acquision of all the capital asssets” (Bennouna, Meredith & Marchant, 2010) as provided in the above case. The budget is detailed as follows. From this total budgeted amount, a unit cost of a garbage truck would cost $150,000 totaling $300,000 for 2 units. The Council would have require 1 bulldozer totalling $240,000. Equally, the council will require 3 lawn mowers for a total cost of $48,000. Last but not least, the council would acquire 1 activity center for a total cost of $650,000.

All of the above “capital assets will have varrying useful lives” (Lam K.C., Wang & Lam M.C.K.,2007). This means that the council should expect to have generated incomes equals to the estimated depreciation to break even with the cost of acquiring the assets. This gives an approximate value of the depreciation to be reflected on the county’s balance sheet.

For instance,the accounting department of the council should charge $30,000 yearly depreciation for garbage truck until 10 years are over. For the case of the bull dozer, the council should all charge #30,000 yearly depreciation untill 8 years are over. With regards to accounting for teh cost of lown mowers, the council should charge $9,600 yearly depreciation for 5 years and $16250 yearly depreciation for 40 years when accounting for the activity center. “Understandig these figures would help the council determine if they are utilizing the assets appropriatly for maximum gain” (Publishing, O. E. C. D., 2001).

References

Bennouna K., Meredith G. & Marchant T., (2010) “Improved capital budgeting decision making: evidence from Canada", Management Decision, Vol. 48 (2) pp.225 – 247

Harvard Business School. (2009). Preparing a budget: Expert solutions to everyday challenges.

Lam K.C., Wang D., & Lam M.C.K. (2007) “The capital Budgeting Evaluation practices (2004) of building contractors in Hong Kong” International Journal of Project Management, Vol. 25(8) p 824-834

Publishing, O. E. C. D. (2001). Managing Public Expenditure: A Reference Book for Transition Countries. Paris: Organisation for Economic Co-operation and Development.