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Frankie owns Fries With That (FWT), a food truck business that sells a range of food including burgers, fries, and cold drinks. The food truck visits festivals, markets, and community events throughout the year.
In October 2021, Fries With That upgraded their food truck to a larger vehicle. This allowed them to expand the preparation and cooking area to serve customers faster.
You can use FWT when referring to Fries With That in your answers.
Ensure you state relevant account names and use accurate figures to support your answers.
Fries With That Income Statement (extract) for the year ended 31 March
| 2021 $ | 2022 $ | |
|---|---|---|
| Sales | 85 500 | 95 200 |
| less Expenses | 68 800 | 77 000 |
| Profit for the year | 16 700 | 18 200 |
Discuss the usefulness of the Income Statement (extract) above for decision making for Fries With That. In your answer explain:
The new food truck cost $60 000 excluding GST to buy and an additional $15 000 excluding GST to install the grills and equipment to be ready to use.
Food truck expenses – including maintenance, petrol, and insurance – total $700 excluding GST per month.
Justify how the food truck spending above will be reported in the Income Statement and/or Statement of Financial Position for Fries With That for the year ended 31 March 2022. In your answer explain:
Frankie agreed to take Fries With That’s food truck to his daughter’s graduation party and supply food free of charge. At the end of the event, the costs (food and wages) related to the graduation party totalled $1 030.
Discuss how and why the spending for the graduation party will be reported in Fries With That’s financial statements for the year ended 31 March 2022. In your answer explain:
Fries With That often attends private events. The customer is invoiced in full after the event.
Fries With That
Notes to the Statement of Financial Position (extract) as at 31 March 2022
1. Accounts Receivable
| Accounts Receivable | 5 650 | |
| less Allowance for doubtful debts | 170 | 5 480 |
Justify how the reporting of accounts receivable in Fries With That’s Statement of Financial Position as at 31 March 2022 enhances decision making. In your answer explain:
Fries With That
Trial Balance (extract) as at 31 March 2022
| Interest on loan | 3000 | Loan (8% p.a., due September 2028) | 40000 |
Additional information $200 interest is due on the loan.
Discuss how the loan in the Trial Balance (extract) above will be reported in Fries With That's Statement of Financial Position as at 31 March 2022. In your answer explain:
Justify how the $200 interest due on the loan will be reported in Fries With That's Income Statement for the year ended 31 March 2022 and Statement of Financial Position as at 31 March 2022. In your answer explain: