Part One: In 2015, Fran Lexa opened Fran's Flowers, a small shop selling floral arrangements. On December 31, 2016, her accounting records show the following:
Sales revenue .................................................................................................. $ 53,000
Utilities for shop ................................................................................................. $ 1,000
Inventory on December 31, 2016 ...................................................................... $ 9,200
Inventory on January 1, 2016 .......................................................................... $ 12,600
Rent for shop ..................................................................................................... $ 4,400
Sales commissions ............................................................................................ $ 4,100
Purchases of merchandise .............................................................................. $ 38,000
Requirement
Prepare an income statement for Fran's Flowers, a merchandiser, for the year ended December 31, 2016.
Part Two: Fran's Flowers succeeded so well that Fran decided to manufacture her own brand of floral supplies: Floral Place Manufacturing. At the end of December 2017, her accounting records show the following:
Utilities for plant ............................................................................................. $ 4,300
Delivery expense ........................................................................................... $ 3,800
Sales salaries expense .................................................................................. $ 4,800
Plant janitorial services .................................................................................. $ 1,250
Work in process inventory, December 31, 2017 ............................................ $ 4,000
Finished goods inventory, December 31, 2016 ........................................................ 0
Finished goods inventory, December 31, 2017 .............................................. $ 4,500
Sales revenue ............................................................................................ $ 109,000
Customer service hotline expense ................................................................. $ 1,700
Direct labor ................................................................................................... $ 22,000
Direct material purchases ............................................................................ $ 31,000
Rent on manufacturing plant .......................................................................... $ 9,400
Raw materials inventory, December 31, 2016 ............................................. $ 18,000
Raw materials inventory, December 31, 2017 ............................................... $ 7,500
Work in process inventory, December 31, 2016 ...................................................... 0
Requirements
1. Calculate the cost of goods manufactured for Floral Place Manufacturing for the year ended December 31, 2017.
2. Prepare an income statement for Floral Place Manufacturing for the year ended December 31, 2017.
3. How does the format of the income statement for Floral Place Manufacturing differ from the income statement of Fran's Flowers?
Part Three: Show the ending inventories that would appear on these balance sheets:
1. Fran's Flowers at December 31, 2016.
2. Floral Place Manufacturing at December 31, 2017.