Question

Personal Budget At the beginning of the school year, Katherine Malloy 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) $7,990 Purchase season football tickets in September 110 Additional entertainment for each month 280 Pay fall semester tuition in September 4,300 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) 990 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.

KATHERINE MALLOY
Cash Budget
For the Four Months Ending December 31
	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	$	$	$	$
Overall 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. Malloy can see that her present plan ------------ sufficient cash. If Malloy did not budget but went ahead with the original plan, she would be $---------- ----------- at the end of December, with no time left to adjust.

Answer 1

a.

KATHERINE MALLOY
Cash Budget
For the Four Months Ending December 31
	September	October	November	December
Estimated cash receipts from:
Part-time job	990	990	990	990
Deposit				600
Total cash receipts	990	990	990	1590
Estimated cash payments for:
Season football tickets	110
Additional entertainment	280	280	280	280
Tuition	4300
Rent	390	390	390	390
Food	220	220	220	220
Deposit	600
Total cash payments	5900	890	890	890
Overall cash increase (decrease)	-4910	100	100	700
Cash balance at beginning of month	7990	3080	3180	3280
Cash balance at end of month	3080	3180	3280	3980

b. The four monthly budgets presented are prepared as static budgets.

c. Malloy can see that her present plan will not provide sufficient cash. If Malloy did not budget but went ahead with the original plan, she would be $320 ($4300 - $3980) short at the end of December, with no time left to adjust.