Question

Prepare income statements (Learning Objective 5)

Answer 1

Answer:

Part 1              Penny Henderson  

                    Income Statement  

For the year ended December 31, 2013  

 

 Sales                                                   $53,000

 Less: Cost of goods sold  

 Beginning Inventory               12,700

Add: Purchases                37,000                    

Total Goods available for sale    49,700                      

Less: Inventory, end          9,600                    

Cost of goods sold                        $40,100

 Gross profit                                         $12,900

Less: Operating expenses  

 Utilities expense                 1,400

Rent expense                4,600

 Sales commission        4 ,900                    

Total operating expense                       $10,900

 Net Income                                           $2,000

Part 2

1.  $77,350

2.                         Floral Manufacturing  

                           Income Statement  

            For the year ended December 31, 2014  

 

Sales                                           $109,000

Less: Cost of goods sold    

Raw materials, beginning       11,000

Add:Purchases               34,000              

Raw materials available      45,000

Less: Raw material, end        6,500              

Cost of raw material used      38,500

Add: Direct labor               20,000              

Prime Cost                       58,500

Add: Factory overhead      22,350              

Manufacturing cost      80,850

Add: Work in process, beginning      -

Less: Work in process, Ending  3,500                

Cost of Goods Manufactured   77,350

Add: Finished goods, beginning         -

Cost of goods available for sale 77,350

Less: Finished goods, ending  4,000              

Cost of goods sold                       73,350

Gross profit                                    $35,650

Less: Operating expenses  

Customer service hotline                 1,700

Net Income                                    $33,950

3. The difference between the 2013 and 2014 income statement is the composition of their cost of goods sold. In 2013, there is no cost of goods manufactured, raw materials and work in process account like 2014.

Part 3

1. Ending inventory of $9,600

2. Ending inventory of $14,000

Explanation:

Part 2

1.                        Floral Manufacturing

       Statement of Cost of Goods Manufactured

          For the year ended December 31, 2014

Raw materials, beginning       11,000

Add:Purchases               34,000              

Raw materials available      45,000

Less: Raw material, end        6,500              

Cost of raw material used      38,500

Add: Direct labor               20,000              

Prime Cost                       58,500

Add: Factory overhead      22,350              

Manufacturing cost      80,850

Add: Work in process, beginning      -

Less: Work in process, Ending  3,500                

Cost of Goods Manufactured   77,350

3. The difference in the 2013 and 2014 preparation came from the balances of working in process and raw materials in the 2014 production wherein 2013 on the hand don't have it.

Part 3.

1. 2013 ending inventory consists of the goods not yet sold at the end of the year.

2. 2014 ending inventory consists of raw materials ending balance of $6,500 plus the work in process ending balance of $3,500 and the finished goods ending balance of $4,000.