Question

1. 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)	$10,850
   Purchase season football tickets in September	200
   Additional entertainment for each month	310
   Pay fall semester tuition in September	5,600
   Pay rent at the beginning of each month	750
   Pay for food each month	690
   Pay apartment deposit on September 2 (to be returned December 15)	750
   Part-time job earnings each month (net of taxes)	1,500

   This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

   Open spreadsheet

   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.

   Craig Kovar
   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 Craig Kovar?

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

Answer 1

a) Cash budget is given below:

b) The four monthly budgets that are presented are prepared as flexible budgets because we will be taking into account any changes in assumptions in future.

c)Craig can see that his present plan does not have sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $1,550 short at the end of December, with no time left to adjust.