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

Question

The following events took place for Chi-Lite Inc. during June, 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.

• Purchased $264,300 of materials. • Used $227,300 of direct materials in production. • Incurred $196,000 of direct labor wages. • Applied factory overhead at a rate of 75% of direct labor cost. • Transferred $547,500 of work in process to finished goods. • Sold goods with a cost of $526,000. • Sold goods for $941,500. • Incurred $226,200 of selling expenses. • Incurred $84,200 of administrative expenses. Chi-Lite Inc. Income Statement For the Month Ended June 30 Revenues Cost of Goods Sold Gross Profit Selling and Administrative Expenses: Selling Expenses Administrative Expenses Total Selling and Administrative Expenses Income from Operations

Explanation / Answer

a Revenues 941500 Cost of goods sold 526000 Gross Profit 415500 Selling and administrative expenses: Selling expenses 226200 Administrative expenses 84200 Total Selling and administrative expenses 310400 Income from operations 105100 b Materials inventory, June 30 37000 =264300-227300 Work in process inventory, June 30 22800 =(227300+196000+196000*75%)-547500 Finished goods inventory, June 30 21500 =547500-526000

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