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 $438,100 of materials.
•	Used $376,800 of direct materials in production.
•	Incurred $324,000 of direct labor wages.
•	Applied factory overhead at a rate of 75% of direct labor cost.
•	Transferred $906,000 of work in process to finished goods.
•	Sold goods with a cost of $863,100.
•	Sold goods for $1,544,900.
•	Incurred $371,100 of selling expenses.
•	Incurred $138,100 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

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
Sales revenue		$1544900
Cost of goods sold		863100
Gross profit		$681800
Selling and Administrative Expenses:
Selling expense	$371100
Administrative expense	138100
Total Selling and Administrative Expenses		509200
Operating income		$172600

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

Materials inventory, June 30 (438100-376800)	$61300
Work in process inventory, June 30 (376800+324000*1.75-906000)	$37800
Finished goods inventory, June 30 (906000-863100)	$42900