Peter Likando has worked for some years as a sales representative, but has recently been made redundant. He intends to start up in business on his own account, using K15,000 which he currently has invested with a building society. Peter maintains a bank account showing a small credit balance, and he plans to approach his bank for the necessary additional finance. Peter provides the following additional information.

(a)Arrangements have been made to purchase fixed assets costing K8,000. These will be paid for at the end of September and are expected to have a five-year life, at the end of which they will possess a nil residual value.

(b)Stocks costing K5,000 will be acquired on 28^th September and subsequent monthly purchases will be at a level sufficient to replace forecast sales for the month.

(c)Forecast monthly sales are K3,000 for October, K6,000 for November and December, and K10,500 from January 20X4 onwards.

(d)Selling price is fixed at the cost of stock plus 50%.

(e)Two months' credit will be allowed to customers but only one month's credit will be received from suppliers of stock.

(f)Running expenses, including rent but excluding depreciation of fixed assets, are estimated at K1,600 per month.

(g)Peter intends to make monthly cash drawings of K1,000.

Required:

Prepare Peter Likando's budgeted profit and loss account and a budgeted balance sheet.