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. How 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