ACCESS IN BB-ACC202
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ISBN: 9780135375587
Author: Pearson
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 2.44AP
Prepare income statements (Learning Objective 5)
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. Flow 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
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Chapter 2 Solutions
ACCESS IN BB-ACC202
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Revenue recognition explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=816Q6pOaGv4;License: Standard Youtube License