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:

Incurred $66,900 of administrative expenses.

*** Please fill the accounts with the "$" next to them.

a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.

b. Determine the inventory balances at the end of the first month of operations.

• Purchased $210,000 of materials. • Used $180,600 of direct materials in production. • Incurred $156,000 of direct labor wages. • Applied factory overhead at a rate of 70% of direct labor cost. • Transferred $428,000 of work in process to finished goods. • Sold goods with a cost of $417,900. • Sold goods for $748,000. • Incurred $179,700 of selling expenses. •

Incurred $66,900 of administrative expenses.

*** Please fill the accounts with the "$" next to them.

a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.

Chi-Lite Inc. Income Statement For the Month Ended June 30 Revenues $ Cost of Goods Sold $ Gross Profit $ Selling Expenses $ Administrative Expenses $ Income from Operations $

b. Determine the inventory balances at the end of the first month of operations.

Materials inventory, June 30 $ Work in process inventory, June 30 $ Finished goods inventory, June 30 $

Explanation / Answer

Income Statement

For the month ended June 30

Materials Inventory=$210000purchased-$180600 used

=$29400

Work in process

Direct Material=$180600

Direct Labour=$156000

Factory overhead=70%×156000=$109200

Total =$445800

Less: Trfd to Finished=$428000

Inventory of work in process=$17800

Finished goods inventory=Production-Sold

=$428000-$417900=$10100

Please give your feedback!! Happy Learning :)

Particulars Amount($) Revenue 748000 Cost of goods sold (417900) Gross profit 330100 Selling Exp (179700) Admn Exp (66900) Income from operations 83500

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