Richard Toms has agreed to purchase the business of Norman Soul with effect from 1 August 2017. Soul’s budgeted working capital at 1 August 2017 is as follows:

In addition to paying Soul for the acquisition of the business, Toms intends to improve the liquidity position of the business by introducing £10,000 capital on 1 August 2017. He has also negotiated a bank overdraft limit of £15,000. It is probable that 10% of Soul's debtors will in fact be bad debts and that the remaining debtors will settle their accounts during August subject to a cash discount of 10%.
The opening accounts payable are to be paid during August. The sales for the first four months of Toms's ownership of the business are expected to be as follows: August £24,000, September £30,000, October £30,000 and November £36,000. All sales will be on credit and debtors will receive a twomonth credit period. Gross profit will be at a standard rate of 25% of selling price. In addition, in order to further improve the bank position and to reduce his opening inventory, Toms intends to sell on 1 August 2017 at cost price £8,000 of inventory for cash. In order to operate within the overdraft limit Toms intends to control inventory levels and to organise his purchases to achieve a monthly rate of inventory turnover of 3. He will receive one month's credit from his suppliers.
General cash expenses are expected to be £700 per month.

Required:
(a) An inventory budget for the four months ending 30 November 2017 showing clearly the inventory held at the end of each month.
(b) A cash budget for the four months ending 30 November 2017 showing clearly the bank balance at the end of each month.

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Current assets Inventory at cost Accounts receivable Current liabilities Accounts payable Bank overdraft £ 13,000 25,000 10,000 20,000 4 38,000 (30,000) £ 8,000