Question

Personal Budget 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) $9,050 Purchase season football tickets in September 120 310 Additional entertainment for each month Pay fall semester tuition in September Pay rent at the beginning of each month Pay for food each month Pay apartment deposit on September 2 (to be returned December 15) Part-time job earnings each month (net of taxes) 4,900 440 250 600 1,120 a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments. 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 o di dubbed HOO O DO Od 00 000 000 Additional entertainment Tuition Rent Food Deposit

Answer 1

a.

	September	October	November	December
Estimated cash receipts from:
Part time job	$1,120	$1,120	$1,120	$1,120
Deposit				$600
Total cash receipts	$1,120	$1,120	$1,120	$1,720(1,120+600)
Less estimated cash payments for:
Season football tickets	$-120
additional entertainment	$-310	$-310	$-310	$-310
Tuition	$-4,900
rent	$-440	$-440	$-440	$-440
food	$-250	$-250	$-250	$-250
deposit	$-600
Total cash payments	$-6,620	$-1,000	$-1,000	$-1,000
Cash increase (decrease)	$-5,500(1,120-6,620)	$120	$120	$120
Plus cash at the beginning	$9,050	$3,550	$3,670	$3,790
Cash at the end of month	$3,550(-5500+9050)	$3,670(120+3550)	$3,790(3670+120)	$3,910(3790+120)

B. The expenses given here are fixed each month so he budget is static budget

c. Craig need 4,900 by end of December to pay for spring tution however he is only left with $3,910

Craig can see that his present plan will not provide sufficient cash

if craig did not budget but went ahead with original plan he would be $990 short at the end of December with no time left

(4,900-3,910)=$990