At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the monthsof 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 followinginformation relates to the budget: Cash balance, September 1 (from a summer job) . . . . . . . . . . . . . . . . . $9,250Purchase season football tickets in September . . . . . . . . . . . . . . . . . . . . . . 160Additional entertainment for each month . . . . . . . . . . . . . . . . . .. . . . . . . . . 250Pay fall semester tuition in September . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800Pay rent at the beginning of each month . . . . . . . . . . . . . . . . . . . . . . . . . . . 600Pay for food each month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550Pay apartment deposit on September 2 (to be returned December 15) . 600Part-time job earnings each month (net of taxes) . . . . . . . . . . . . . . . . . .. 1,200a. 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?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1E: At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of...

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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?

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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