Question

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) $8,150
Purchase season football tickets in September 130
Additional entertainment for each month 210
Pay fall semester tuition in September 4,200
Pay rent at the beginning of each month 500
Pay for food each month 460
Pay apartment deposit on September 2
(to be returned December 15) 500
Part-time job earnings each month (net of taxes) 1,000
a. Prepare a cash budget for September, October, November, and December.
b. What are the budget implications for Craig Kovar?

Answer 1

Craig Kovar

Cash Budget

September October November December

Beginning balance $8,150 $3,150 $2,980 $2,810

Wages 1,000 1,000 1,000 1,000

Deposit refund 500

Total cash receipts $9,150 $4,150 $3,980 $4,310

Payments:

Season football tickets 130

Entertainment 210 210 210 210

Semester tuition 4,200 4,200

Rent 500 500 500 500

Food 460 460 460 460

Apartment deposit 500

Total payments $6,000 $1,170 $1,170 $5,370

Cash balance $3,150 $2,980 $2,810 ($1,060)

b. Craig needs to borrow $1,060 in December to meet up with expenses. Alternatively, he will need to increase his monthly earnings by more than $265. He can also reduce his monthly expenses by $265 at least, especially from additional entertainment and food. He should also start considering how he could survive January without additional income.

Step-by-step explanation:

a) Data and Calculations:

Receipts:

Cash balance, September 1 (from a summer job) $8,150

Part-time job earnings each month (net of taxes) 1,000

Apartment deposit returned in December $500

Payments:

Season football tickets in September 130

Additional entertainment for each month 210

Semester tuition in September 4,200

Rent at the beginning of each month 500

Food each month 460

Apartment deposit on September 2 500