Financial Statements of a Manufacturing Firm The following events took place for

Question

Financial Statements of a Manufacturing Firm The following events took place for Chi-Lite Inc. during June, the first month of operations as a producer of road bikes: . Purchased $182,900 of materials . Used $157,300 of direct materials in production. . Incurred $136,000 of direct labor wages. Applied factory overhead at a rate of 80% of direct labor cost. Transferred $386,000 of work in process to finished goods. . Sold goods with a cost of $365,800. . Sold goods for $654,800. . Incurred $157,300 of selling expenses. . Incurred $58,500 of administrative expenses.

Explanation / Answer

a. Income Statement

b. Calculation of Inventory balances

Since June is the first month of operations for the company, there would be no beginning balances for the the Direct materials, Work in Process, and Finished Goods.

i) Material Inventory, June 30

ii) Work in Process inventory, June 30

We can calculate Ending balance of Work in process by using Schedule of Cost of Goods Manufactured

From the above table,

Total work in process cost = $402,100

Out of Total work in process cost of $402,100, goods with cost $386,000 is transferred to finished goods. Means company has completed the manufacturing and send the goods of cost $386,000 to the finished goods inventory. Means cost of Goods Manufactured is $386,000.

Therefore,

Cost of Goods Manufactured = Total Cost of Work in process - Ending Work in Process

Ending Work in Process = Total Cost of Work in process - Cost of Goods Manufactured

Ending Work in Process = $402,100 - $386,000 = $16,100

Therefore, Ending Work in Process = $16,100

iii) Finished goods, June 30

We can calculate Ending balance of Finished goods by using Schedule of Cost of Goods Sold

Chi-Lite Inc. Income Statement For the month Ended June 30 Sales revenue $654,800 Cost of Goods Sold $365,800 Gross Profit $289,000 Selling and Administrative Expenses: Selling Expenses $157,300 Administrative Expenses $58,500 Total Selling and Administrative Expenses $215,800 Net Income/Profit $73,200

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