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Personal Budget At the beginning of the school year, Craig Kovar decided to prepare a cash...

Personal Budget

At the beginning of the school year, Craig Kovar 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) $7,510
Purchase season football tickets in September 100
Additional entertainment for each month 260
Pay fall semester tuition in September 4,100
Pay rent at the beginning of each month 360
Pay for food each month 200
Pay apartment deposit on September 2 (to be returned December 15) 500
Part-time job earnings each month (net of taxes) 930

a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Craig Kovar
Cash Budget
For the Four Months Ending December 31
September October November December
Estimated cash receipts from:
Part-time job $fill in the blank e5886a012073fa2_2 $fill in the blank e5886a012073fa2_3 $fill in the blank e5886a012073fa2_4 $fill in the blank e5886a012073fa2_5
Deposit fill in the blank e5886a012073fa2_7
Total cash receipts $fill in the blank e5886a012073fa2_8 $fill in the blank e5886a012073fa2_9 $fill in the blank e5886a012073fa2_10 $fill in the blank e5886a012073fa2_11
Less estimated cash payments for:
Season football tickets $fill in the blank e5886a012073fa2_13
Additional entertainment fill in the blank e5886a012073fa2_15 $fill in the blank e5886a012073fa2_16 $fill in the blank e5886a012073fa2_17 $fill in the blank e5886a012073fa2_18
Tuition fill in the blank e5886a012073fa2_20
Rent fill in the blank e5886a012073fa2_22 fill in the blank e5886a012073fa2_23 fill in the blank e5886a012073fa2_24 fill in the blank e5886a012073fa2_25
Food fill in the blank e5886a012073fa2_27 fill in the blank e5886a012073fa2_28 fill in the blank e5886a012073fa2_29 fill in the blank e5886a012073fa2_30
Deposit fill in the blank e5886a012073fa2_32
Total cash payments $fill in the blank e5886a012073fa2_33 $fill in the blank e5886a012073fa2_34 $fill in the blank e5886a012073fa2_35 $fill in the blank e5886a012073fa2_36
Cash increase (decrease) $fill in the blank e5886a012073fa2_37 $fill in the blank e5886a012073fa2_38 $fill in the blank e5886a012073fa2_39 $fill in the blank e5886a012073fa2_40
Less cash balance at beginning of month fill in the blank e5886a012073fa2_42 fill in the blank e5886a012073fa2_43 fill in the blank e5886a012073fa2_44 fill in the blank e5886a012073fa2_45
Cash balance at end of month $fill in the blank e5886a012073fa2_46 $fill in the blank e5886a012073fa2_47 $fill in the blank e5886a012073fa2_48 $fill in the blank e5886a012073fa2_49

Feedback

Sometimes an item may be a decrease in one period and an increase in a different period.

Review the definitions of static budgets and flexible budgets.

What weaknesses are shown by this cash budget?

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

Static

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan will not provide  sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $fill in the blank 9b0586052fd4fe0_3 short  at the end of December, with no time left to adjust.

sorry about the weird code the website the assignment is on is glitched

Solutions

Expert Solution

a. Cash budget
September October November December
Estimated cash receipts from:
Part-time job 930 930 930 1300
Deposit 450
Total cash receipts a 930 930 930 1750
Less estimated cash payments for:
Season football tickets 100
Additional entertainment 260 260 260 260
Tuition 4100
Rent 360 360 360 360
Food 200 200 200 200
Deposit 500
Total cash payments b 5520 820 820 820
Overall cash increase (decrease) a-b -4590 110 110 930
Add:Cash balance at beginning of month 7510 2920 3030 3140
Cash balance at end of month 2920 3030 3140 4070
b. Static budget
Flexible budget is based on actual level of activity
c. Spring semester tution=fall semester tution=$ 4100
Cash balance at end of December=$ 4100
Shortage=4100-4070=$ 30
Craig can see that her present plan will not provide sufficient cash to pay fall semester tution fee.
If Craig did not budget but went ahead with the original plan, she would be $ 30 short at the end of December, with no time left to adjust.

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