At the beginning of the 2006 school year, Hakim Davis 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) . . . . . . . . . . . . . . . . . . . $6,000
Purchase season football tickets in September . . . . . . . . . . . . . . . . . . . . . 180
Additional entertainment for each month . . . . . . . . . . . . . . . . . . . . . . . . . 250
Pay fall semester tuition on September 3 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,250
Pay rent at the beginning of each month . . . . . . . . . . . . . . . . . . . . . . . . . . 400
Pay for food each month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
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. Are the budgets prepared as static budgets or flexible budgets?
c. What are the budget implications for Hakim Davis?