The following events took place for Chi-Lite Inc. during June 2016, the first mo
ID: 2468602 • Letter: T
Question
The following events took place for Chi-Lite Inc. during June 2016, the first month of operations as a producer of road bikes:
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.
Chi-Lite Inc.
Income Statement
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B. Determine the inventory balances at the end of the first month of operations.
• Purchased $399,560 of materials. • Used $342,540 of direct materials in production. • Incurred $290,100 of direct labor wages. • Applied factory overhead at a rate of 73% of direct labor cost. • Transferred $818,820 of work in process to finished goods. • Sold goods with a cost of $796,000. • Sold goods for $1,400,110. • Incurred $313,290 of selling expenses. • Incurred $125,090 of administrative expenses.Explanation / Answer
Income statement
Sales
$1,400,110
Less : cost of goods sold
(796,000)
Gross profit
604,110
Less: Selling & administrative expense
Selling expense
$313,290
Administrative expense
125,090
Total selling and administrative expense
(438,380)
Net operating income
$165,730
Materials inventory
$57,020
WIP inventory
25,593
Finished goods inventory
22,820
Sales
$1,400,110
Less : cost of goods sold
(796,000)
Gross profit
604,110
Less: Selling & administrative expense
Selling expense
$313,290
Administrative expense
125,090
Total selling and administrative expense
(438,380)
Net operating income
$165,730
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