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) ...................................... $6,000

Purchase season football tickets in September........................................... 150

Additional entertainment for each month................................................... 250

Pay fall semester tuition in September ...................................................... 3,500

Pay rent at the beginning of each month.................................................... 450

Pay for food each month............................................................................. 400

Pay apartment deposit on September 2 (to be returned December 15) ...... 450

Part-time job earnings each month (net of taxes) ...................................... 1,300

the total cash payments for December are $698? TRUE or FALSE

cash balance at end of month for December is? ………

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

based on this budget which month or months will cash decrease?

Answer 1

As the cash balance at the end of december month is $3150, which is less than the requirement of $3500 of fall semester fees, Priscilla Wescott must try to reduce the expenses in order to fulfill the cash requirement which can be done either by reducing entertainment expenses or by any othe expenses proportionately during the period of 4 months.

1). False, Total cash payments for December month are $1100
2). Cash balance at the end of month for December is $3150
3). Four monthly budgets are presented as static budgets.
4). Based on the budget, In the month of september there is cash decrease = $6000-$2100 = $3900, while in other months there is cash increase.