Case Study

Rhy$\text{'}$s Fries $-$ Part $3$

June $1,20x1$

After the success of his first convention Ronald starts to wonder if he can make this business become his career. He is confident in his abilities but isn't really sure where to go next. A patron from the LadLard event mentioned to him during the show that there is a bigger and more prestigious event coming up at the end of the month; the Oilmaggedon. This $5$ day outdoor event $($June $20-24)$ brings together hundreds of vendors and many thousands of hungry patrons. On top of that there are often cooking celebrities and famous food critics wandering around. Ronald is convinced this is the exposure he needs to give his business a boost. However, the event only has a limited amount of spots and it's only for those with food trucks. It's also $400km\text{'}$s away.

A bigger event also means higher entrance fees. The cost to get a spot at Oilmaggedon is $$4,000.$ There are no options to rent a deep fryer and no amenities are provided. Ronald decides it's worth the risk. He quits his job to dedicate his full attention to Rhy$\text{'}$s Fries.

June $5,20$X$1$

His first task is to find a suitable food truck. Luckily, he noticed at the end of the LadLard convention that a fellow vendor had a "FOR SALE" sign on his food truck. The vendor was asking $$15,000$ for the truck but Ronald was able to negotiate him down to $$13,000.$ It's a used truck, but Ronald estimates it has a remaining useful life of $4$ years $($straight line depreciation$).$ To purchase the truck he put down $$1,500$ cash and took out a secured loan from the bank for the remainder. The loan is a one year loan with a $6\%$ interest rate. The loan is a fixed principle plus interest loan and the first installment is due on June $30.$ After picking up the food truck he pays the $$4,000$ entry fee. Ronald also purchases and pays the required insurance for the truck that cost $$1,080$ for the year.

June $18,20x1$

Two days before the event starts Ronald takes out a short term business operating loan from a local short term lending firm for $$7,000.$ The loan is due in full by June $30,20x1$ and has a $$500$ interest charge due upon payment. Then he heads over to the local megamart to buy $100$ bags of potatoes at $$45$ per bag, $20$ pails of oil at $$35$ per pail and $$475$ worth of amenities $($plates$,$ napkins, and utensils$).$

$3.)$ Complete any required journal entries for these events.