Question

CH 16 EXERCISES 3,4,8,10,14.15 eBook Calculator 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 $400,000 of materials. • Used $343,750 of direct materials in production. • Incurred $295,000 of direct labor wages. • Applied factory overhead at a rate of 75% of direct labor cost. • Transferred $815,000 of work in process to finished goods. • Sold goods with a cost of $789,000. • Sold goods for $1,400,000. • Incurred $316,000 of selling expenses. • Incurred $125,000 of administrative expenses. 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 Selling and Administrative Expenses: Total Selling and Administrative Expenses 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

Answer 1

Income statement

Sales revenue		1400000
Cost of goods sold		789000
Gross profit		611000
Selling and administrative expense
Selling expense	316000
Administrative expense	125000
total Selling and administrative expense		441000
Net income		170000

Calculate balances

Material inventory (400000-343750)	56250
Work in process inventory (343750+295000*1.75-815000)	45000
Finished goods (815000-789000)	26000