Use scissors to cut oval shapes out of the white fabric. You'll need one for each sock/guest. These will be the penguins' bellies.
Cut out smaller ovals to use for the penguins' faces (also from the white fabric).
From the yellow fabric, cut out triangular beaks and feet.
Cut out enough fabric to make one penguin sock, and make it yourself to see if the shapes will work well on the socks. This will let you know if you need to cut the shapes differently before you get too far into the project.
At the Party:
Place socks, shapes, wiggly eyes, and glue out on a table, and let the kids assemble their own sock puppets.
Children may decorate their penguins with markers if they wish.
Be sure to label the socks with the children's names, and let the socks dry for at least 20 to 30 minutes before your guests play with them.