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.



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