Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON

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Textbook Question
Chapter 2, Problem 2.49BP

Prepare income statements (Learning Objective 5)

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. 1. Calculate the cost of goods manufactured for Floral Place Manufacturing for the year ended December 31, 2017.
2. 2. Prepare an income statement for Floral Place Manufacturing for the year ended December 31, 2017.
3. 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. 1. Fran’s Flowers at December 31, 2016.
2. 2. Floral Place Manufacturing at December 31, 2017.
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