The World Restaurant is situated in a local shopping center and serves food of many different cultures. It also caters private functions for companies. The results of operations for the fourth quarter of 2020 are as follows: Sales$500,000 Less cost of sales 345,000 Gross margin155,000 Less selling, general, and administrative expenses 60,000 Income before taxes 95,000 Less taxes on income19,000 Net income$ 76,000 Additional information: 1.Sales and cost of sales are expected to increase by 13 percent in each of the next two quarters. 2.Eighty percent of sales are collected in the quarter of sale and 20 percent are collected in the quarter following sale. 3.The balance in accounts receivable at the end of 2020 relates to sales in the fourth quarter of 2020. 4.Food purchases in the fourth quarter of 2020 are $346,975. 5.The balance in accounts payable at the end of 2020 relates to purchases in the fourth quarter of 2020. 6.Food inventory at the end of 2020 is $17,000. For 2021, the company plans to hold ending inventory equal to 30 percent of the subsequent quarter’s cost of sales. 7.Selling, general, and administrative expenses are expected to increase by $12,000 due to increases in advertising and salaries. All other expenses in this category are expected to remain constant. 8.Seventy-five percent of inventory purchases are paid in the quarter of purchase and 25 percent are paid in the following quarter. All other expenses, including taxes, are paid in the quarter incurred. 9.Selling and administrative expense includes $5,000 of depreciation related to fixtures and equipment with a book value (net of accumulated depreciation) of $60,000 at the end of 2021. 10.The tax rate is expected to remain at 20 percent and taxes are paid in the quarter incurred. 11.The cash balance at the end of 2020 is $40,000. 12.Common stock at the end of 2020 is $25,000 and retained earnings is $105,256. 13.Asset accounts are cash, accounts receivable, inventory, and furniture and fixtures. The only liability account is accounts payable. Owner’s equity accounts are common stock and retained earnings. 

Required: a.Prepare a budgeted income statement for the first quarter of 2021