Part One: In 2012, Penny Henderson opened Penny’s Posies, a small retail shop selling floral arrangements. On December 31, 2013, her accounting records show the following:

Sales revenue.................................................................................................... $ 53,000

Utilities for shop................................................................................................ $ 1,400

Inventory on December 31, 2013..................................................................... $ 9,600

Inventory on January 1, 2013............................................................................ $ 12,700

Rent for shop..................................................................................................... $ 4,600

Sales commissions............................................................................................. $ 4,900

Purchases of merchandise................................................................................. $ 37,000

Requirement

Prepare an income statement for Penny’s Posies, a merchandiser, for the year ended December 31, 2013.

Part Two: Penny’s Posies was so successful that Penny decided to manufacture her own brand of floral supplies: Floral Manufacturing. At the end of December 2014, her accounting records show the following:

Utilities for plant.......................................................................................... $ 4,300

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

Sales salaries expense................................................................................. $ 4,400

Plant janitorial services................................................................................ $ 1,550

Work in process inventory, December 31, 2014......................................... $ 3,500

Finished goods inventory, December 31, 2013.......................................... 0

Finished goods inventory, December 31, 2014.......................................... $ 4,000

Sales revenue.............................................................................................. $ 109,000

Customer service hotline expense.............................................................. $ 1,700

Direct labor................................................................................................. $ 20,000

Direct material purchases............................................................................ $ 34,000

Rent on manufacturing plant...................................................................... $ 9,600

Raw materials inventory, December 31, 2013............................................. $ 11,000

Raw materials inventory, December 31, 2014............................................. $ 6,500

Work in process inventory, December 31, 2013......................................... 0

Requirements

1. Calculate the Cost of Goods Manufactured for Floral Manufacturing for the year ended December 31, 2014.

2. Prepare an income statement for Floral Manufacturing for the year ended December 31, 2014. 

3. How does the format of the income statement for Floral Manufacturing differ from the income statement of Penny’s Posies?

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

1. Penny’s Posies at December 31, 2013

2. Floral Manufacturing at December 31, 2014