Problem 1:
In 20X3, Kelly opened Kelly’s Boutique. On December 31, 20X4, her accounting records show the following:
Inventory on December 31, 20X4...................... $9,850
Inventory on January 01, 20X4......................... 10,700
Sales revenue............................................. 46,000
Utilities for store.......................................... 2,450
Rent for store.............................................. 4,000
Sales Commissions....................................... 1,500
Purchases of merchandise............................... 27,000
Prepare an income statement for Kelly’s Boutique, a merchandiser.
Problem 2:
Kelly’s Boutique succeeded so well that Kelly decided to manufacture her own brand of make-up, called CoverUp. At the end of December 20X5, her accounting records show the following:
Work in process inventory, December 31, 20X5...... $640
Finished goods inventory, December 31, 20X4........ 0
Finished goods inventory, December 31, 20X5........ 5,700
Sales revenue................................................ 97,450
Customer service hotline................................... 1,000
Utilities for plant............................................ 3,400
Delivery expense............................................ 1,500
Sales salaries................................................ 4,500
Plant janitorial services.................................... 1,250
Direct labor.................................................. 17,500
Direct material purchases................................. 30,000
Rent on manufacturing plant.............................. 9,000
Direct materials inventory, December 31, 20X4....... 12,000
Direct materials inventory, December 31, 20X5....... 8,750
Work in process inventory, December 31, 20X4...... 0
1.) Prepare a schedule of cost of goods manufactured for CoverUP Manufacturing.
2.) Prepare an income statement for CoverUp Manufacturing.
3.) How does the format of the income statement for CoverUp Manufacturing differ from the income statement of Kelly’s Boutique?
Problem 3:
Show the ending inventories that would appear on these balance sheets:
1.) Kelly’s Boutique at December 31, 20X4.
2.) CoverUp Manufacturing at December 31, 20X5.