LEM 10-5. Master Budget - 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 2014 are as follows: Additional information:

Sales 550,000

Less cost of sales 345,000

Gross margin 155,000

Less selling, general, and administrative expenses 60,000

Income before taxes 95,000

Less income taxes 38,000

Net income $57,000

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 and20 percent are collected in the quarter following sale.

3. The balance in accounts receivable at the end of 2014 relates to sales in the fourth quarter of 2014.

4. Food purchases in the fourth quarter of 2014 are $346,975.

5. The balance in accounts payable at the end of 2014 relates to purchases in the fourth quarter of 2014. Food inventory at the end of 2014 is $17,000. For 2015, the company plans to hold ending inventory equal to 30 percent of the subsequent quarters cost of sales.

7. Selling,general,andadministrativeexpensesareexpectedtoincreaseby$12,000dueto increases in advertising and salaries. All other expenses in this category are expected to remain constant. 8. Seventy-fivepercentofinventorypurchasesarepaidinthequarterofpurchaseand25 percent are paid in the following quarter. All other expenses, including taxes, are paid in the quarter incurred. 9. Sellingandadministrativeexpenseincludes$5,000ofdepreciationrelatedtofixturesand equipment with a book value (net of accumulated depreciation) of $60,000 at the end of 2014. 10. Thetaxrateisexpectedtoremainat40percent. 11. Thecashbalanceattheendof2014is$40,000. 12. Commonstockattheendof2014is$25,000andretainedearningsis$105,256. 13. Assetaccountsarecash,accountsreceivable,inventory,andfurnitureandfixtures.The only liability account is accounts payable. Owners equity accounts are common stock and retained earnings. Required a. Prepareabudgetedincomestatementforthefirstquarterof2015. b. Prepareacashbudgetforthefirstquarterof2015. c. Prepareabudgetedbalancesheetasoftheendofthefirstquarterof2015. d. ThecompanyisdiscussingthepossibilityofexpandingitsrestauranttoincludeaThaisection late in the first quarter of 2015. The sections construction would require cash payments of $50,000. Assuming the company wants a minimum cash balance of $15,000 at the end of the first quarter, can a new section be added without obtaining additional funds?