Part One: In 2011, Lindsey Tapia opened Lindsey's Pets, a small retail shop selling pet supplies. On December 31, 2011, her accounting records show the following:

Inventory on December 31, 2011....................................................................... $ 9,400

Inventory on January 1, 2011.............................................................................. 12,200

Sales revenue...................................................................................................... 55,000

Utilities for shop.................................................................................................. 1,500

Rent for shop....................................................................................................... 3,400

Sales commissions............................................................................................... 4,100

Purchases of merchandise................................................................................... 34,500

Requirement

Prepare an income statement for Lindsey's Pets, a merchandiser, for the year ended

December 31, 2011.

Part Two: Lindsey's Pets succeeded so well that Lindsey decided to manufacture her own brand of pet toys-Best Friends Manufacturing. At the end of December 2012, her accounting records show the following:

Work in process inventory, December 31, 2012................................................. $ 4000

Finished goods inventory, December 31, 2011.............................................................0

Finished goods inventory, December 31, 2012......................................................3,000

Sales revenue......................................................................................................103,000

Customer service hotline expense..........................................................................1,400

Utilities for plant....................................................................................................4,500

Delivery expense....................................................................................................2,500

Sales salaries expense............................................................................................4,200

Plant janitorial services..........................................................................................1,150

Direct labour.......................................................................................................20,000

Direct material purchases....................................................................................39,000

Rent on manufacturing plant................................................................................8,400

Raw materials inventory, December 31, 2011...................................................10,000

Raw materials inventory, December 31, 2012.....................................................8,000

Work in process inventory, December 31, 2011.........................................................0

Requirements

1. Prepare a schedule of cost of goods manufactured for Best Friends Manufacturing for the year ended December 31, 2012.

2. Prepare an income statement for Best Friends Manufacturing for the year ended December 31, 2012.

3. How does the format of the income statement for Best Friends Manufacturing differ from the income statement of Pets?

Part Three: Show the ending inventories that would appear on these balance sheets:

1. Lindsey's Pets at December 31, 2011.

2. Best Friends Manufacturing at December 31, 2012.