Part 2: Expansion and Second Month of Business Deciding the pizza business would soon take over their home kitchen, the Wilsons signed a lease for a 400 square foot space at an annual gross lease cost of $18 per square foot. (Gross lease cost means the rent includes all utilities, insurance, property taxes, etc.) The previous tenant, a gelato maker, had left its installed commercial freezer/refrigerator, and the space was already equipped with ample counter space for assembling pizzas. Freshly Frozen Pizzas could move into the space immediately; the first lease payment is due December 1. In the first week of November, the Wilsons spent $75 fine-tuning their pizza fundraiser flyers and distributing the flyers to two high school band departments, an elementary school PTA, and their church youth group. They would keep the prices the same as for the preschool fundraiser Freshly Frozen Pizzas would charge $6 per pizza, and the sponsor would charge $12 per pizza. All four groups enthusiastically agreed to sponsor a pizza fundraiser. The church youth group was ready to start immediately; they wanted the pizzas ready to deliver by Thanksgiving. The two band departments and the PTA wanted to distribute the flyers in November, and accept delivery of the pizzas during the second week of December. In all cases, Freshly Frozen Pizzas would not collect payment from individual pizza customers, but the company would be paid by the fundraising sponsor (band, PTA, youth group, etc.) in the subsequent month after the pizzas are delivered. Next, the Wilsons secured a wholesale supplier for the pizza ingredients and packaging supplies. Freshly Frozen Pizzas would save about 25 percent by purchasing supplies in volume, driving down the average cost per pizza to $2.25. The wholesale supplier required payment at the time of supply delivery. Because Freshly Frozen Pizzas delivers its products frozen, the Wilsons decided to stock up on inventory by making and freezing pizzas in advance so that they could readily fill upcoming orders. In November, they spent $675 on pizza supplies, enough to make 300 pizzas (160 cheese, 140 pepperoni). The church youth group had orders for 128 pizzas (68 cheese and 60 pepperoni). Freshly Frozen Pizzas delivered the frozen pizzas by the desired date. On November 10, Freshly Frozen Pizza received payment in full from their first customer (the preschool fundraiser from the previous month).

Part 2 Assignment Use the accompanying Excel worksheets to complete the following:

a. Second month T-Accounts transactions The freezer purchased in the first month will continue to depreciate FFP paid off the credit card bill from the previous month There is inventory remaining at month end

b. Second month Income Statement

c. Second month Balance Sheet

d. Second month Statement of Cash Flows

Debit Amount ($) Credit Amount ($) 250 576 Description Formation Expense Design & Copy Expense Dough & Sauce Expense Cheese Expense Pepperoni Expense Packaging Expense Depreciation Total 50 115 120 55 20 8 618 42 618 Amount ($) Amount ($) 576 250 50 115 Description Cash flow from Operating Activities: Sales Expenses Formation Expenses Design & Copy Expnse Dough & Sauce Expense Cheese Expense Pepperoni Expense Packing Expense Total Cash flow from Financing Activities: Capital Total Cash flow from Investing Activities: Closing Cash Balance: 120 55 20 -610 -34 1,500 1,500 0 1,466 Liabilities & Equity Captial (1,500) Loss (42) Credit Card Liability Total Liabilities & Equity: Amount ($) Assets Amount ($) Freezer (480) 1,458 Depreciation (8) 472 480 Cash 1,466 1,938 Total Assets: 1938 Debit Amount ($) Credit Amount ($) 250 576 Description Formation Expense Design & Copy Expense Dough & Sauce Expense Cheese Expense Pepperoni Expense Packaging Expense Depreciation Total 50 115 120 55 20 8 618 42 618 Amount ($) Amount ($) 576 250 50 115 Description Cash flow from Operating Activities: Sales Expenses Formation Expenses Design & Copy Expnse Dough & Sauce Expense Cheese Expense Pepperoni Expense Packing Expense Total Cash flow from Financing Activities: Capital Total Cash flow from Investing Activities: Closing Cash Balance: 120 55 20 -610 -34 1,500 1,500 0 1,466 Liabilities & Equity Captial (1,500) Loss (42) Credit Card Liability Total Liabilities & Equity: Amount ($) Assets Amount ($) Freezer (480) 1,458 Depreciation (8) 472 480 Cash 1,466 1,938 Total Assets: 1938