1. The capital expenditures budget reports expected cash receipts and cash payments related to the sale and purchase of plant assets.
True or False
True
False
- A 90-day note issued on April 10 matures on:
A) July 9 .
B) July 10 .
C) July 11 .
D) July 12 .
E) July 13 .
The correct answer and explanation is:
Statement 1: The capital expenditures budget reports expected cash receipts and cash payments related to the sale and purchase of plant assets.
Answer: False
Explanation: The capital expenditures budget is a financial plan that estimates the amount of money a company plans to spend on purchasing, upgrading, or maintaining physical assets like equipment, machinery, or buildings. However, it does not directly report cash receipts (inflows of cash) from the sale of assets. The capital expenditures budget primarily focuses on cash payments related to the acquisition and improvement of these long-term assets. For instance, if a company plans to buy new machinery, the capital expenditures budget will outline how much cash will be paid for the machinery, but it will not include any expected cash receipts from selling old equipment or assets. These receipts would typically be reported under the cash flow statement in the investing activities section.
Statement 2: A 90-day note issued on April 10 matures on:
Answer: B) July 10
Explanation: A note with a maturity of 90 days means that the note will mature 90 days after the issue date. To calculate the maturity date for a note issued on April 10:
- Starting Date: The note is issued on April 10.
- Counting 90 Days: To determine the maturity date, we count 90 days starting from April 10.
- April has 30 days, so from April 10 to April 30 is 20 days.
- This leaves 70 days to be counted into May and June.
- May has 31 days, and June has 30 days.
- By the end of June, we will have counted 51 days (20 from April + 31 from May).
- The remaining 39 days will fall into July, starting from July 1.
- Adding 39 days to July 1 gives us July 10 as the maturity date.
Thus, the correct answer is B) July 10.
This calculation ensures that all dates are accounted for and that weekends and holidays are not excluded in the maturity calculation unless specifically noted in the agreement.