Question

a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate the cash outflows, a decrease in cash or cash payments.

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

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan ______ sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $______ short at the end of December.

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Answer 1

Requirement (a) Craig Kovar Cash Budget For the Four months ending December 31 September October November December Estimated Cash receipts from: Part time job 830 $ 830 $ 830 $ 830 $ Deposit 500 Total Cash Receipts 830 $ 830 $ 830 $ 1,330 Less- Estimated Cash payments for $ Seasonal football tickets 90 230 $ -230 $ -230 $ Additional Entertainment -230 $ Tution -3,600 -320 $ -320 $ -320 $ Rent -320 $ -180 $ -180 $ -180 $ Food 180 Deposit -500 Total Cash Payments -730 $ -4,920 $ -730 $ -730 Cash Increase (Decrease) 100 $ -4,090 100 $ 600 Plus: Cash balance at beginning of month 6,700 $ 2,610 $ 2,710 $ 2,810 Cash Balance at end of month 2,710 $ 2,810 $ 3,410 2,610 Requirement (b) The four monthly budgets presented are based on static budget. Reason- The part time job earnings are constant throughout the 4 months. Requirement (c) 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 (6700-34100 $ 3,290 short at the end of December.