Question

1.

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)	$7,510
Purchase season football tickets in September	100
Additional entertainment for each month	260
Pay fall semester tuition in September	4,100
Pay rent at the beginning of each month	360
Pay for food each month	200
Pay apartment deposit on September 2 (to be returned December 15)	500
Part-time job earnings each month (net of taxes)	930

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.

b. What are the budget implications for Craig Kovar?

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 _________ short  at the end of December, with no time left to adjust.

Answer 1

a

	Cash Budget
Particulars	September	October	November	December
Opening Cash	7,510	2,920	3,030	3,140
Season football tickets	-100	0	0	0
Additional entertainment	-260	-260	-260	-260
Semester tuition fees	-4100	0	0	0
Rent	-360	-360	-360	-360
Food	-200	-200	-200	-200
Apartment deposit paid	-500	0	0	0
Apartment deposit refunded		0	0	500
Part time job earnings	930	930	930	930
Spring tuition fees	0	0	0	-4100
Closing Cash	2,920	3,030	3,140	(350)

b. Craig shall fall short by $350 at the end of December for payment of his spring tuition fees