Question

Answer completely and correctly please.

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)	$9,250
Purchase season football tickets in September	160
Additional entertainment for each month	250
Pay fall semester tuition in September	4,800
Pay rent at the beginning of each month	600
Pay for food each month	550
Pay apartment deposit on September 2 (to be returned December 15)	600
Part-time job earnings each month (net of taxes)	1,200

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:
Part-time job		$		$		$		$
Deposit
Total cash receipts		$		$		$		$
Less estimated cash payments for:
Season football tickets		$
Additional entertainment				$		$		$
Tuition
Rent
Food
Deposit
Total cash payments		$		$		$		$
Cash increase (decrease)		$		$		$		$
Plus cash balance at beginning of month
Cash balance at end of month		$		$		$		$

b. 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 $_?_ short  at the end of December, with no time left to adjust.

Answer 1

• Requirement [a]

	September	October	November	December
Estimated cash receipts from:
Part-time job	$1,200	$1,200	$1,200	$1,200
Deposit				$600
Total cash receipts	$1,200	$1,200	$1,200	$1,800
Less estimated cash payments for:
Season football tickets	$160	$
Additional entertainment	$250	$250	$250	$250
Tuition	$4,800
Rent	$600	$600	$600	$600
Food	$550	$550	$550	$550
Deposit	$600
Total cash payments	$6,960	$1,400	$1,400	$1,400
Cash increase (decrease)	($5,760)	($200)	($200)	$400
Plus cash balance at beginning of month	$9,250	$3,490	$3,290	$3,090
Cash balance at the end of the month	$3,490	$3,290	$3,090	$3,490

• Requirement [b]

>Cash balance at the end of December = $ 3490
>Spring Semester tuiton fees = $ 4800
>Shortage of Cash = 4800 – 3490= $ 1310

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 $ 1310 short  at the end of December, with no time left to adjust.