Prepare income statements (Learning Objective 5)
Part One: In 2015, Fran Lexa opened Fran’s Flowers, a small shop selling floral arrangements. On December 31, 2016, her accounting records show the following:
Sales revenue | $53,000 |
Utilities for shop | $1,000 |
Inventory on December 31, 2016 | $9,200 |
Inventory on January 1, 2016 | $12,600 |
Rent for shop | $4,400 |
Sales commissions | $4,100 |
Purchases of merchandise | $38,000 |
Requirement
Prepare an income statement for Fran’s Flowers, a merchandiser, for the year ended December 31, 2016.
Part Two: Fran’s Flowers succeeded so well that Fran decided to manufacture her own brand of floral supplies: Floral Place Manufacturing. At the end of December 2017 her accounting records show the following:
Utilities for plant | $4,300 |
Delivery expense | $3,800 |
Sales salaries expense | $4,800 |
Plant janitorial services | $1,250 |
Work in process inventory, December 31, 2017 | $4,000 |
Finished goods inventory, December 31, 2016 | 0 |
Finished goods inventory, December 31, 2017 | $4,500 |
Sales revenue | $109,000 |
Customer service hotline expense | $1,700 |
Direct labor | $22,000 |
Direct material purchases | $31,000 |
Rent on manufacturing plant | $9,400 |
Raw materials inventory, December 31, 2016 | $18,000 |
Raw materials inventory, December 31, 2017 | $7,500 |
Work in process inventory, December 31, 2016 | 0 |
Requirements
- 1. Calculate the cost of goods manufactured for Floral Place Manufacturing for the year ended December 31, 2017.
- 2. Prepare an income statement for Floral Place Manufacturing for the year ended December 31, 2017.
- 3. How does the format of the income statement for Floral Place Manufacturing differ from the income statement of Fran’s Flowers?
Part Three:
Show the ending inventories that would appear on these balance sheets:
- 1. Fran’s Flowers at December 31, 2016.
- 2. Floral Place Manufacturing at December 31, 2017.
Learn your wayIncludes step-by-step video
Chapter 2 Solutions
Managerial Accounting (5th Edition)
Additional Business Textbook Solutions
Financial Accounting, Student Value Edition (4th Edition)
Principles of Accounting Volume 1
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
Financial Accounting (12th Edition) (What's New in Accounting)
Horngren's Accounting (12th Edition)
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
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