Question

1. Personal An accounting device used to plan and control resources of operational departments and divisions.Budget

   At the beginning of the school year, Priscilla Wescott decided to prepare a A budget of estimated cash receipts and payments.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)	$6,950
   Purchase season football tickets in September	90
   Additional entertainment for each month	240
   Pay fall semester tuition in September	3,800
   Pay rent at the beginning of each month	340
   Pay for food each month	190
   Pay apartment deposit on September 2 (to be returned December 15)	500
   Part-time job earnings each month (net of taxes)	860

   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.

   Priscilla Wescott
   Cash Budget
   For the Four Months Ending December 31
   	September	October	November	December
   Estimated cash receipts from:
   Part-time job Additional entertainment Food Part-time job Rent Tuition	$	$	$	$
   Deposit Additional entertainment Deposit Food Rent Tuition
   Total cash receipts	$	$	$	$
   Less estimated cash payments for:
   Season football tickets Cash Insurance Movie tickets Part-time job Season football tickets	$
   Additional entertainment Additional entertainment Cash Insurance Movie tickets Part-time job		$	$	$
   Tuition Cash Insurance Movie tickets Part-time job Tuition
   Rent Cash Insurance Movie tickets Part-time job Rent
   Food Cash Food Insurance Movie tickets Part-time job
   Deposit Deposit Insurance Movie tickets Part-time job Prepaid rent
   Total cash payments	$	$	$	$
   Cash increase (decrease)	$	$	$	$
   Plus cash balance at beginning of month Less cash balance at beginning of month Plus cash balance at beginning of month
   Cash balance at end of month	$	$	$	$

   Feedback

   Sometimes an item may be a decrease in one period and an increase in a different period.

   Review the definitions of static budgets and flexible budgets.

   What weaknesses are shown by this cash budget?

   Learning Objective 2 and Learning Objective 5.

   b. Are the four monthly budgets that are presented prepared as A budget that does not adjust to changes in activity levels.static budgets or A budget that adjusts for varying rates of activity.flexible budgets?
   
   Static

   • Static
   • Flexible

   c. What are the budget implications for Priscilla Wescott?

   Priscilla can see that her present plan will not provide

   • will provide
   • will not provide
   sufficient cash. If Priscilla did not budget but went ahead with the original plan, she would be $ short
   • over
   • short
   at the end of December, with no time left to adjust.

   Feedback

   Sometimes an item may be a decrease in one period and an increase in a different period.

   Review the definitions of static budgets and flexible budgets.

   What weaknesses are shown by this cash budget?

   Learning Objective 2 and Learning Objective 5.

   Feedback

   Partially correct

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Answer 1

Priscilla Wescot Cash Budget For the Four Months Ending December 31 September October November December 860 860 860 860 500 1,360 860 860 860 240 240 240 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 Required cash to pay for tuition Shortfall 340 190 340 190 340 190 90 240 3,800 340 190 500 5,160 (4,300) 6,950 2,650 770 90 2,650 2,740 770 90 2,740 2,830 770 590 2,830 3,420 3,800 (380) Reqb Static budget A budget that does not adjust to changes in activity levels As budget is fixed & does not change depending on activity level like entertainment or food Reqc Priscilla can see that her present plan will not provide sufficient cash. If Priscilla did not budget but went ahead with her original plan, she would be $380 short at the end of December, with no time left to adjust.