The following events took place for Chi-Lite Inc. during June 2016, the first mo

Question

The following events took place for Chi-Lite Inc. during June 2016, the first month of operations as a producer of road bikes:

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

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

A)

Chi-Lite Inc.

Income Statement

for the Month Ended June 2016

Schedule of Cost of Goods Manufactured
For the month Ended June 2106

B.The inventory balances at the end of the first month of operations.

1 Revenue $1,400,110. 2 Cost of Goods Sold: add: Begining Finished goods inventory --- Cost of Goods manufactured ( see below) $818,820 Cost of goods available for sale $818,820 Deduct ending finished goods inventory $22,820 $796,000. 3 Gross Profit (1-2) $604,110 4 Operating costs: Selling expenses. $313,290 Administrative expenses. $125,090 $438,380 5 Operating Income (3-4) $165,730

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