At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the

Question:

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) . . . . . . . . . . . . . . . . . . . . . . . . $9,250

Purchase season football tickets in September . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Additional entertainment for each month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Pay fall semester tuition in September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800

Pay rent at the beginning of each month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600

Pay for food each month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550

Pay apartment deposit on September 2 (to be returned December 15) . . . . . 600

Part-time job earnings each month (net of taxes) . . . . . . . . . . . . . . . . . . . . . . . 1,200

a. Prepare a cash budget for September, October, November, and December.

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?

Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...