Question

In: Accounting

At the beginning of the 2016 school year, Britney Logan decided to prepare a cash budget...

At the beginning of the 2016 school year, Britney Logan 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) $8,080
Purchase season football tickets in September 110
Additional entertainment for each month 280
Pay fall semester tuition in September 4,400
Pay rent at the beginning of each month 390
Pay for food each month 220
Pay apartment deposit on September 2 (to be returned December 15) 600
Part-time job earnings each month (net of taxes) 1,000

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

Britney Logan
Cash Budget
For the Four Months Ending December 31, 2016
September October November December
Estimated cash receipts from:
Part-time job $ $ $ $
Deposit
Total cash receipts $ $ $ $
Estimated cash payments for:
Season football tickets $
Additional entertainment $ $ $
Tuition
Rent
Food
Deposit
Total cash payments $ $ $ $
Cash increase (decrease) $ $ $ $
Cash balance at beginning of month
Cash balance at end of month $ $ $ $

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

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

Solutions

Expert Solution

Britney Logan
Cash Budget
For the Four Months Ending December 31, 2016
September October November December
Estimated cash receipts from:
Part-time job $1,000 $1,000 $1,000 $1,000
Deposit 600
Total cash receipts $1,000 $1,000 $1,000 $1,600
Estimated cash payments for:
Season football tickets 110
Additional entertainment 280 280 280 280
Tuition 4400
Rent 390 390 390 390
Food 220 220 220 220
Deposit 600
Total cash payments 6000 890 890 890
Cash increase (decrease) ($5,000) $110 $110 $710
Cash balance at beginning of month 8080 $3,080 3190 3300
Cash balance at end of month $3,080 $3,190 $3,300 $4,010
b
They are static budgets as the four-month budgets do not change with any identified activity level
c
present budget
Tuition fee =
4400-4010
$390 Deficit
Therefore plan has to be adjusted. Some of them are as below
Increasing her part-time job hours
Renting a lower cost apartment
Take scholarship opportunities to reduce the tuition payment
etc

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