Question

At the beginning of the school year, Priscilla Wescott decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1 (from a summer job)	$6,680
Purchase season football tickets in September	90
Additional entertainment for each month	230
Pay fall semester tuition in September	3,600
Pay rent at the beginning of each month	320
Pay for food each month	180
Pay apartment deposit on September 2 (to be returned December 15)	500
Part-time job earnings each month (net of taxes)	830

a. Prepare a cash budget for September, October, November, and December. Enter all amounts as positive values except cash decrease which should be indicated with a minus sign.

Priscilla Wescott
Cash Budget
For the Four Months Ending December 31
	September	October	November	December
Estimated cash receipts from:
	$	$	$	$
Total cash receipts	$	$	$	$
Less estimated cash payments for:
	$
		$	$	$
Total cash payments	$	$	$	$
Cash increase (decrease)	$	$	$	$
Cash balance at end of month	$	$	$	$

b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?

c. What are the budget implications for Priscilla Wescott?

Priscilla can see that her present plan sufficient cash. If Priscilla did not budget but went ahead with the original plan, she would be $ at the end of December, with no time left to adjust.

Answer 1

a.

Priscilla Wescott
Cash Budget
For the Four Months Ending December 31
	September	October	November	December
Estimated cash receipts from:
Part-time job	830	830	830	830
Apartment deposit				500
Total cash receipts	830	830	830	1330
Less estimated cash payments for:
Season football tickets	90
Additional entertainment	230	230	230	230
Fall semester tuition	3600
Rent	320	320	320	320
Food	180	180	180	180
Apartment deposit	500
Total cash payments	4920	730	730	730
Cash increase (decrease)	-4090	100	100	600
Cash balance at beginning of month	6680	2590	2690	2790
Cash balance at end of month	2590	2690	2790	3390

b. Static budgets

c. Priscilla can see that her present plan does not provide sufficient cash. If Priscilla did not budget but went ahead with the original plan, she would be $210 ($3600 - $3390) short at the end of December, with no time left to adjust.