Question
In: Accounting
Requirements (Part one):Prepare an income statement for Petunia's Posies, a merchandiser, for the year ended December...
Requirements (Part one):Prepare an income statement for Petunia's Posies, a merchandiser, for the year ended December 31, 2016.
Part One: In 2015, Petunia Conway opened Petunia's Posies, a small retail shop selling floral arrangements
On December 31, 2016, her accounting records show the following:
|
Sales revenue. . . . . . . . . . . . . . . . |
$51,000 |
|
Utilities for shop. . . . . . . . . . . . . . |
$1,200 |
|
Inventory on December 31, 2016. . |
$9,900 |
|
Inventory on January 1, 2016. . . . . |
$12,600 |
|
Rent for shop. . . . . . . . . . . . . . . . |
$3,200 |
|
Sales commisions. . . . . . . . . . . . . |
$4,300 |
|
Purchases of merchandise. . . . . . |
$38,500 |
----------
Requirements (Part two):
|
1. |
Calculate the Cost of Goods Manufactured for
Floral Mart Manufacturing for the year ended December31,2017. |
|
2. |
Prepare an income statement for
Floral Mart Manufacturing for the year ended December 31,2017. |
|
3. |
How does the format of the income statement for
Floral Mart Manufacturing differ from the income statement ofPetunia's Posies? |
Part Two: Petunia's Posies was so successful that Petunia decided to manufacture her own brand of floral supplies: Floral Mart Manufacturing.
At the end of December 2017, her accounting records show thefollowing:
|
Utilities for plant. . . . . . . . . . . . . . . . . . . . . . . . . |
$5,100 |
|
Delivery expense. . . . . . . . . . . . . . . . . . . . . . . . |
$4,500 |
|
Sales salaries expense. . . . . . . . . . . . . . . . . . . . |
$5,000 |
|
Plant janitorial services. . . . . . . . . . . . . . . . . . |
$1,750 |
|
Work in process inventory, December 31, 2017. . . |
$5,500 |
|
Finished goods inventory, December 31, 2016. . . |
$0 |
|
Finished goods inventory, December 31, 2017. . . |
$2,000 |
|
Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . |
$103,000 |
|
Customer service hotline expense. . . . . . . . . . . |
$1,800 |
|
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$27,000 |
|
Direct material purchases. . . . . . . . . . . . . . . . . . |
$39,000 |
|
Rent on manufacturing plant. . . . . . . . . . . . . . . . |
$8,200 |
|
Raw materials inventory, December 31, 2016. . . . |
$17,000 |
|
Raw materials inventory, December 31, 2017. . . . |
$8,500 |
|
Work in process inventory, December 31, 2016. . . |
$0 |
Part Three: Show the ending inventories that would appear on these balance sheets:
|
1. |
Petunia's Posies at December 31, 2016 |
|
2. |
Floral Mart Manufacturing at December 31, |
Solutions
Expert Solution
| Requirements ( Part one) | |||||
| Income Statement for Petunia's Posies for the year ended December 31, 2016 | |||||
| Particulars | Amount | Particulars | Amount | ||
| Opening Inventory ( Inventory as on 01.01.2016) | 12600 | Sale Revenue | 51000 | ||
| Purchase of Merchandise | 38500 | Closing Inventory ( Inventory as on 31.12.2016) | 9900 | ||
| Gross Profit | 9800 | ||||
| Total | 60900 | Total | 60900 | ||
| Utilities for Shop | 1200 | Gross Profit c/d | 9800 | ||
| Rent for Shop | 3200 | ||||
| Sales Commission | 4300 | ||||
| Net Profit | 1100 | ||||
| Total | 9800 | Total | 9800 |
| Requirement ( Part Two) |
| 1 | Cost of Goods Sold | ||||||
| Opening Inventory + Purchases - closing Inventory | |||||||
| Opening Inventory | Amount | 17000 | |||||
| Raw materials inventory, December 31, 2016. . . . | $17,000 | ||||||
| Finished goods inventory, December 31, 2016. . . | $0 | ||||||
| Work in process inventory, December 31, 2016. . . | $0 | ||||||
| Add: | Purchases | 39000 | |||||
| Less: | Closing Inventory | ||||||
| Raw materials inventory, December 31, 2017. . . . | $8,500 | ||||||
| Finished goods inventory, December 31, 2017. . . | $2,000 | ||||||
| Work in process inventory, December 31, 2017. . . | $5,500 | -16000 | |||||
| Direct Material | 40000 | ||||||
| Add: | Direct Labour | 27000 | |||||
| Add: | Manufacturing OH | ||||||
| Utilities for Plant | 5100 | ||||||
| COGS | 72100 | ||||||
| Here the item represented as 31December 2016 will be showing as Opening value as on 01.01.2017 |
| 2 | Income Statement for Floral Mart Manufacturing for the year ended December 31, 2017 | |||||
| Particulars | Amount | Particulars | Amount | |||
| Direct Material Purchases | 39000 | Sale Revenue | 103000 | |||
| Opening Finished Goods Inventory 31.12.2016 | 0 | Raw Material Inventory 31.12.2017 | 8500 | |||
| Opening Raw Material Inventory 31.12.2016 | 17000 | Work In Progress Inventory 31.12.2017 | 5500 | |||
| Work In Progress Inventory 31.12.2016 | 0 | Finished Goods Inventory 31.12.2017 | 2000 | |||
| Direct Labour | 27000 | |||||
| Utilities for Plant | 5100 | |||||
| Gross Profit b/d | 30900 | |||||
| Total | 119000 | Total | 119000 | |||
| Customer Service hotline expenses | 1800 | Gross Profit c/d | 30900 | |||
| Delivery Expenses | 4500 | |||||
| Plant Janitorial Expenses | 1750 | |||||
| Net Profit | 22850 | |||||
| Total | 30900 | Total | 30900 |
| 3 | Difference : | |||||||
| a. | Earlier he was only trader, Now Manufacturere hence the manufacturing expenses will be part of trading account. And Admin expenses will part of P and L A/c | |||||||
| b. | Earlier, No WIP in account, now WIP to be recorded and for each types of inventory Raw Material, WIP and Finished Goods to be maintained | |||||||
| c. | Expesnes charged to P and L only, where as in Floral Manufacturing expenses directly associated with manufacturing charge to COGS / Trading A/c and non related to factory expenses charged to P and L A/c | |||||||
| Part Three: | ||||||||
| Ending Inventory in Petunia's Poises 31.12.2016 | ||||||||
| Closing Inventory ( Inventory as on 31.12.2016) | 9900 | |||||||
| Ending Inventory in Floral Mart Manufacturing 31.12.2017 | ||||||||
| Raw Material Inventory 31.12.2017 | 8500 | |||||||
| Work In Progress Inventory 31.12.2017 | 5500 |
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