Prepare income statements (Learning Objective 5)

Part One: On January 1, 2007, Terri Shaw opened Precious Memories, a small retail store dedicated to selling picture frames, crafts, and art. On December 31, 2007, her accounting records show the following:

Part Two: Precious Memories succeeded so well that Shaw decided to manufacture her own special brand of picture frames, to be called Forever Manufacturing. At the end of December 2009, her accounting records show the following:

\section*{Requirements}
1. Prepare a schedule of cost of goods manufactured for Forever Manufacturing for the year ended December 31, 2009.
2. Prepare an income statement for Forever Manufacturing for the year ended December 31, 2009.
3. How does the format of the income statement for Forever Manufacturing differ from the income statement of Precious Memories?
Part Three: Show the ending inventories that would appear on these balance sheets:
1. Precious Memories at December 31, 2007 2. Forever Manufacturing at December 31, 2009

Transcribed Image Text:

Store rent $ 7,000 Sales salaries... 4,500 Freight-in. 550 Inventory on December 31, 2007..... 8,750 Sales revenue 90,000 Store utilities. 1,950 Purchases of merchandise. 36,000 Inventory on January 1, 2007 12,700 Advertising expense..... 2,300 Requirement Prepare an income statement for Precious Memories, a merchandiser, for the year ended December 31, 2007.