Part One: In 2010, Pam Baker opened Pam's Posies, a small retail shop selling fl oral arrangements. On December 31, 2011, her accounting records show the following:
Sales revenue.................................................................................................. $55,000
Utilities for shop.............................................................................................. $ 1,100
Inventory on December 31, 2011................................................................... $ 9,800
Inventory on January 1, 2011.......................................................................... $12,200
Rent for shop................................................................................................... $ 3,200
Sales commissions........................................................................................... $ 4,300
Purchases of merchandise............................................................................... $37,000
Requirement
Prepare an income statement for Pam's Posies, a merchandiser, for the year ended December 31, 2011.
Part Two: Pam's Posies was so successful that Pam decided to manufacture her own brand of fl oral supplies: Floral Manufacturing. At the end of December 2012, her accounting records show the following:
Utilities for plant................................................................................................... $ 4,200
Delivery expense................................................................................................... $ 3,000
Sales salaries expense............................................................................................. $ 4,500
Plant janitorial services........................................................................................... $ 1,050
Work in process inventory, December 31, 2012 .................................................... $ 5,000
Finished goods inventory, December 31, 2011............................................................... 0
Finished goods inventory, December 31, 2012..................................................... $ 5,500
Sales revenue....................................................................................................... $109,000
Customer service hotline expense ......................................................................... $ 1,600
Direct labor........................................................................................................... $ 24,000
Direct material purchases..................................................................................... $ 35,000
Rent on manufacturing plant................................................................................. $ 8,200
Raw materials inventory, December 31, 2011 .................................................... $ 18,000
Raw materials inventory, December 31, 2012 ...................................................... $ 9,500
Work in process inventory, December 31, 2011 ............................................................ 0
Requirements
1. Calculate the cost of goods manufactured for Floral Manufacturing for the year ended December 31, 2012.
2. Prepare an income statement for Floral Manufacturing for the year ended December 31, 2012.
3. How does the format of the income statement for Floral Manufacturing differ from the income statement of Pam's Posies?
Part Three: Show the ending inventories that would appear on these balance sheets:
1. Pam's Posies at December 31, 2011
2. Floral Manufacturing at December 31, 2012