financial statments Question Details The following events took place for Wreckin
ID: 2388933 • Letter: F
Question
financial statmentsQuestion Details
The following events took place for Wreckin Ronnie Inc. during July2008, the first month of operations, as a producer of road bikes:
•Purchased $165,800 of materials
•Used $147,600 of direct materials in production
•Incurred $96,250 of direct labor wages.
•Applied factory overhead at a rate of 80% of direct laborcost.
•Transferred $302,900 of work in process to finished goods.
•Sold goods with a cost of $301,300.
•Sold goods for $520,000
•Incurred $119,000 of selling expenses.
•Incurred $52,100 of administrative expenses.
1.Prepare the July income statement for WreckinRonnie. Assume that Wreckin Ronnie uses the perpetualinventory method.
2.Determine the inventory balances at the end of thefirst month of operations.
Explanation / Answer
Revenues $520,000
Cost of goods sold........................................ 301,300
Gross profit.................................................. $218,700
Selling expenses............................................... $119,000
Administrative expenses..................................... 52,100 171,100
Income from operations............................... $ 47,600
===========================================
b. Materials inventory:
Purchased materials................................................. $165,800
Less: Materials used in production.................................. 147,600
Materials inventory, July 31............................................. $ 18,200
Work in process inventory:
Materials used in production..................................... $147,600
Direct labor.......................................................... 96,250
Factory overhead (80% × $96,250)................................. 77,000
Additions to work in process............................................ $320,850
Less: Transferred to finished goods................................ 302,900
Work in process inventory, July 31................................. $ 17,950
Finished goods inventory:
Transferred to finished goods.......................................... $302,900
Less: Cost of goods sold........................................... 301,300
Finished goods inventory, July 31................................... $ 1,600
==============================
a. Materials.............................................................. 137,000
Accounts Payable 137,000
b. Work in Process...................................... 238,000
Factory Overhead............................................ 53,600
Materials 125,750
Wages Payable 165,850
c. Factory Overhead...................... 4,950
. Accounts Payable 4,950
d. Factory Overhead.... . 3,700
. Accumulated Depreciation—Machinery
... and Equipment 3,700
e. Work in Process................. 71,179
. Factory Overhead (1,343 hours × $53) 71,179
f. Finished Goods............. 177,204
. Work in Process 177,204
=====================================================
Direct Direct Factory
Job Materials Labor Overhead Total
No. 601 $18,100 $17,000 $11,395 $ 46,495
No. 602 20,000 25,500 12,190 57,690
No. 603 13,050 9,700 9,275 32,025
No. 605 15,700 14,800 10,494 40,994
Total $177,204
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