Question

Personal Budget

At the beginning of the school year, Priscilla Wescott 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)	$6,000
Purchase season football tickets in September	150
Additional entertainment for each month	250
Pay fall semester tuition in September	3,500
Pay rent at the beginning of each month	450
Pay for food each month	400
Pay apartment deposit on September 2 (to be returned December 15)	450
Part-time job earnings each month (net of taxes)	1,300

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	$	$	$	$
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 the beginning of the month
Cash balance at end of month	$	$	$	$

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

c. What are the budget implications for Priscilla Wescott?

Priscilla can see that her present plan will not provide sufficient cash. If Priscilla did not budget but went ahead with the original plan, she would be______ $ short at the end of December, with no time left to adjust.

Answer 1