Personal Budget At the beginning of the school year, Priscilla Wescott decided t

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:

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.

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

c. What are the budget implications for Priscilla Wescott?

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

Cash balance, September 1 (from a summer job) $7,650 Purchase season football tickets in September 100 Additional entertainment for each month 270 Pay fall semester tuition in September 4,100 Pay rent at the beginning of each month 370 Pay for food each month 210 Pay apartment deposit on September 2 (to be returned December 15) 500 Part-time job earnings each month (net of taxes) 950

Explanation / Answer

a Priscilla Wescott Cash Budget For the Four Months Ending December 31 September October November December Estimated cash receipts from: Part-time job 950 950 950 950 Deposit 0 0 0 500 Total cash receipts 950 950 950 1450 Less estimated cash payments for: Season football tickets 100 0 0 0 Additional entertainment 270 270 270 270 Tuition 4100 0 0 0 Rent 370 370 370 370 Food 210 210 210 210 Deposit 500 0 0 0 Total cash payments 5550 850 850 850 Cash increase (decrease) -4600 100 100 600 Plus cash balance at beginning of month 7650 3050 3150 3250 Cash balance at end of month 3050 3150 3250 3850 minimum cash balance (Spring season school fee) 4100 4100 4100 4100 Excess or deiciency -1050 -950 -850 -250 b Static c She would be short of 250 in the month of December

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