Question

Financial Statements of a Manufacturing Firm

The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes:

•	Purchased $354,000 of materials.
•	Used $304,400 of direct materials in production.
•	Incurred $260,000 of direct labor wages.
•	Applied factory overhead at a rate of 80% of direct labor cost.
•	Transferred $741,500 of work in process to finished goods.
•	Sold goods with a cost of $697,400.
•	Revenues earned by selling bikes, $1,248,300.
•	Incurred $299,900 of selling expenses.
•	Incurred $111,600 of administrative expenses.

a. Prepare the income statement for Rushmore Biking Inc. for the month ending February 28. Assume that Rushmore Biking Inc. uses the perpetual inventory method.

Answer 1

Rushmore Biking Inc. Income Statement For the Month Ended February 28 Revenues Cost of goods sold Gross Profit Selling and administrative expenses: Selling expenses $ 299,900 Administrative expenses 111,600 Total selling and administrative expenses Operating income $ 1,248,300 697,400 $ 550,900 411,500 $ 139,400

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