Prepare income statements (Learning Objective 5)
Part One: In 2015, Patsy Jackson opened Patsy’s Posies, a small retail shop selling floral arrangements. On December 31, 2016, her accounting records show the following:
Sales revenue | $53,000 |
Utilities for shop | $1,100 |
Inventory on December 31, 2016 | $9,100 |
Inventory on January 1, 2016 | $12,000 |
Rent for shop | $4,600 |
Sales commissions | $4,000 |
Purchases of merchandise | $36,000 |
Requirement
Prepare an income statement for Patsy’s Posies, a merchandiser, for the year ended December 31, 2016.
Part Two: Patsy’s Posies was so successful that Patsy decided to manufacture her own brand of floral supplies: Floral City Manufacturing. At the end of December 2017, her accounting records show the following:
Utilities for plant | $4,900 |
Delivery expense | $1,500 |
Sales salaries expense | $4,300 |
Plant janitorial services | $1,350 |
Work in process inventory, December 31, 2017 | $5,000 |
Finished goods inventory, December 31, 2016 | 0 |
Finished goods inventory, December 31, 2017 | $2,500 |
Sales revenue | $104,000 |
Customer service hotline expense | $1,400 |
Direct labor | $23,000 |
Direct material purchases | $30,000 |
Rent on manufacturing plant | $9,600 |
Raw materials inventory, December 31, 2016 | $14,000 |
Raw materials inventory, December 31, 2017 | $8,000 |
Work in process inventory, December 31, 2016 | 0 |
Requirements
- 1. Calculate the Cost of Goods Manufactured for Floral City Manufacturing for the year ended December 31, 2017.
- 2. Prepare an income statement for Floral City Manufacturing for the year ended December 31, 2017.
- 3. Flow does the format of the income statement for Floral City Manufacturing differ from the income statement of Patsy’s Posies?
Part Three:
Show the ending inventories that would appear on these balance sheets:
- 1. Patsy’s Posies at December 31, 2016
- 2. Floral City Manufacturing at December 31, 2017
Learn your wayIncludes step-by-step video
Chapter 2 Solutions
Managerial Accounting (5th Edition)
Additional Business Textbook Solutions
Intermediate Accounting (2nd Edition)
Financial Accounting (12th Edition) (What's New in Accounting)
Horngren's Accounting (11th Edition)
Managerial Accounting (4th Edition)
Construction Accounting And Financial Management (4th Edition)
Cost Accounting (15th Edition)
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