ABC was founded by Alie Alo in 2023. Alie is a budding entrepreneur and recently graduated from a culinary school. Alie made the decision to take her skills 'on the road' and operate a food truck to take advantage of the explosive population of street vendors.

Armed with some inheritance money, Alie went out and purchased a used food truck modifying it to suit her new business. Alie began operating the food truck in April of 2023 and chose December 31st as her year end. During the peak season, Ali hired two of her friends to assist her. She is thinking that perhaps one of them may continue to work with her in the foreseeable future. Her mother suggested to her that she should incorporate her food truck business when she first started. She went ahead and did so but is not sure what that means or what other reasonable alternatives she may have had. Ali has also heard from other food truck owners that they are having issues with employees stealing cash and supplies. She is wondering what reasonable steps she could do to make sure that doesn't happen.

It's now January 2024 and Alie has come to you in order to get her first year financials in order and to assist her with her other questions.

Required:

Based on the information that you have in Exhibit #1 prepare the following and respond to Ali's other questions:

1. Journal entries for all the transactions [show your work when required].
2. Final trial balance in good form.
3. Statement of income [income statement] for the period ended December 31, 2023 in good form.
4. Statement of financial position at December 31, 2023 in good form.

Exhibit #1

The following transactions took place for ABC:

1. ABC was incorporated on January 1^st, 2023. Alie invested $200,000 cash for 1,000 common shares.
2. Alie's mother invested $50,000 cash for 500 common shares.
3. The Frank Bank provided a loan of $150,000 on January 1^st. The loan requires principal payments of $10,000 per year payable on January 1^st of each year. The interest rate is 4%.
4. ABC purchased a used food truck for $45,000 on February 1^st. The truck has a useful life of 8 years and depreciation will be taken straight-line with a full year taken in the year that it was purchased.
5. ABC incurred $8,000 of truck improvement costs that included a new exterior paint job, and refurbishment of the interior. Given the fact that food trucks are more successful when they look new, Alie expects that these truck improvements will only last 5 years.
6. ABC purchased equipment on March 1^st for $25,000. The equipment is being depreciated over 8 years. Take a full year of depreciation for the first year.
7. Annual liability insurance was purchased for $3,000 covering the period February 1 to August 31 annually. The entire amount was paid on February 1^st with cash.
8. Food revenues amounted to $135,000 and all amounts were received in cash. Drink revenues [tracked separately] amounted to $22,000 and were all received in cash.
9. Salaries were paid to two employees. This amount totaled $38,000.
10. Inventory purchases [for souvenir sales] for the period totaled $180,000 with 50% of this amount still owing at year end.
11. The cost of the food that was sold was $40,000 and for beverages $4,400.
12. ABC declared and paid a dividend of $25,000.
13. ABC paid $2,000 for advertising for the year.
14. ABC paid $2,500 for utilities & internet for the year.
15. Food trucks are required to pay fees to the municipality in order to operate. ABC paid a monthly fee of $200 from April 1^st until December 31^st.
16. ABC incurred $800 in fuel costs. Of this amount $200 is still owing as of year end.
17. Since Alie is not operating the food truck during the winter months, there is no food inventory remaining. Alie did need to throw out $900 worth of food that was left over and not usable.

Answer rating: 100% (QA)

Journal Entries for ABC Food Truck for the period ended December 31 2023 1 Common Stock Alie Common Stock Mother Cash For initial investments by share... View the full answer