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 $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	$

Answer 1

Income Statement

For the month ended June 30

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

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

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