The following events took place for Chi-Lite Inc. during June, the first month of operations as a producer of road bikes:
• | Purchased $396,730 of materials. |
• | Used $343,310 of direct materials in production. |
• | Incurred $294,600 of direct labor wages. |
• | Applied factory overhead at a rate of 74% of direct labor cost. |
• | Transferred $816,250 of work in process to finished goods. |
• | Sold goods with a cost of $797,470. |
• | Sold goods for $1,409,300. |
• | Incurred $318,060 of selling expenses. |
• | Incurred $120,840 of administrative expenses. |
Required: | |
a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed. | |
b. Determine the inventory balances at the end of the first month of operations. |
Labels and Amount Descriptions
Labels | |
For the Month Ended June 30 | |
June 30 | |
Selling and administrative expenses | |
Amount Descriptions | |
Administrative expenses | |
Cost of goods sold | |
Factory overhead | |
Gross profit | |
Income from operations | |
Materials | |
Revenues | |
Selling expenses | |
Total selling and administrative expenses |
Income Statement
a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons (:) will fill in where needed.
Chi-Lite Inc. |
Income Statement |
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Inventory Balances
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 |
Solution a:
Chi-Lite Inc. | |||
Income Statement | |||
For the month ended June 30 | |||
Event | Particulars | Amount | |
1 | Revenues | $1,409,300.00 | |
2 | Cost of goods sold | $797,470.00 | |
3 | Gross Profit | $611,830.00 | |
4 | Selling and administrative expenses: | ||
5 | Selling Expenses | $318,060.00 | |
6 | Administrative expenses | $120,840.00 | |
7 | Total Selling and Administrative Expenses | $438,900.00 | |
8 | Income from operations | $172,930.00 |
Solution b:
Inventory Balances | |
30-Jun | |
Particulars | Amount Descriptions |
Materials inventory, June 30 ($396,730 - $343,310) | $53,420.00 |
Work In Process inventory, June 30 ($343,310 + $294,600 + $294,600*74% - $816,250) | $39,664.00 |
Finished Goods inventory, June 30 ($816,250 - $797,470) | $18,780.00 |
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