Financial Statements of a Manufacturing Firm The following events took place for
ID: 2339729 • Letter: F
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:
a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.
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a. Both product and period costs must be reported on the income statement and are necessary to measure income.
b. Determine the inventory balances at the end of the first month of operations.
• Purchased $481,100 of materials. • Used $413,700 of direct materials in production. • Incurred $356,000 of direct labor wages. • Applied factory overhead at a rate of 80% of direct labor cost. • Transferred $1,012,300 of work in process to finished goods. • Sold goods with a cost of $962,200. • Sold goods for $1,722,300. • Incurred $413,700 of selling expenses. • Incurred $154,000 of administrative expenses.Explanation / Answer
Answer
Chi-Lite Inc.
Income Statement
For the Month Ended June 30
Revenues
$ 1,722,300.00
Cost of Goods Sold
$ 962,200.00
Gross Profit
$ 760,100.00
Selling and Administrative Expenses:
Selling Expenses
$ 413,700.00
Administrative Expenses
$ 154,000.00
Total Selling and Administrative Expenses
$ 567,700.00
Income from Operations
$ 192,400.00
Workings
A
Material Purchased
$ 481,100.00
B
Material Used
$ 413,700.00
C = A - B
Material Inventory
$ 67,400.00
A
Material Used
$ 413,700.00
B
Direct Labor Wages
$ 356,000.00
C = B x 80%
Factory Overhead applied
$ 284,800.00
D = A+B+C
Total cost of Work in Process
$ 1,054,500.00
E
Inventory completed & Transferred
$ 1,012,300.00
F = D - E
Work in Process Inventory balance
$ 42,200.00
A
Transferred from WIP
$ 1,012,300.00
B
Cost of Goods Sold
$ 962,200.00
C = A - B
Finished Goods Inventory
$ 50,100.00
Answers
Materials inventory, June 30
$ 67,400.00
Work in process inventory, June 30
$ 42,200.00
Finished goods inventory, June 30
$ 50,100.00
Chi-Lite Inc.
Income Statement
For the Month Ended June 30
Revenues
$ 1,722,300.00
Cost of Goods Sold
$ 962,200.00
Gross Profit
$ 760,100.00
Selling and Administrative Expenses:
Selling Expenses
$ 413,700.00
Administrative Expenses
$ 154,000.00
Total Selling and Administrative Expenses
$ 567,700.00
Income from Operations
$ 192,400.00
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