Star Caf$$ & Restaurant is situated in a local shopping center and serves food of many different cultures.

It also caters private functions of companies. The results of operations for the fourth quarter of $2023$ are

as follows:

Star Caf$$ & Restaurant

Income Statement

For the Fourth Quarter, $2023$

Sales $ $655,000$

Cost of Sales $ $425,000$

Gross Margin $ $230,000$

Selling, General & Administrative

Expenses

$ $75,500$

Income before taxes $ $154,500$

Income Taxes $ $61,800$

Net Income $ $92,700$

Additional Information:

$1)$ Sales and cost of sales are expected to increase by $15\%$ in each of the next two quarters.

$2)80\%$ of sales are collected in the quarter of sale and $20\%$ are collected in the quarter following

sale.

$3)$ Food purchases in the fourth quarter of $2023$ are $ $375,000.$

$4)$ Food inventory at the end of $2023$ is $$42,000.$ For $2024,$ the company plans to hold ending

inventory equal to $30\%$ of the next quarter$$s cost of sales.

MRK$516$ FALL $2023$ Assignment $2$

$5)$ Selling, general, and administrative expenses are expected to increase by $ $15,000$ due to

increases in advertising and salaries. All other expenses in this category are expected to remain

constant.

$6)75\%$ of inventory purchases are paid in the quarter of purchase and $25\%$ are paid in the

following quarter. All other expenses, including taxes, are paid in the quarter incurred.

$7)$ Selling and administrative expense includes $$5,000$ of depreciation related to fixtures and

equipment.

$8)$ The tax rate is expected to remain at $40\%$

$9)$ The cash balance at the end of $2023$ is $ $35,750.$