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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 $511,400 of materials. |
| Used $439,800 of direct materials in production. |
| Incurred $380,000 of direct labor wages. |
| Applied factory overhead at a rate of 75% of direct labor cost. |
| Transferred $1,060,600 of work in process to finished goods. |
| Sold goods with a cost of $1,017,700. |
| Sold goods for $1,821,700. |
| Incurred $437,600 of selling expenses. |
| Incurred $162,800 of administrative expenses. |
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 |
| | | $ |
| | | |
| | | $ |
| Selling and Administrative Expenses: | | |
| | $ | |
| | | |
| Total Selling and Administrative Expenses | | |
| | | $ |
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 | $ |
Equivalent Units of Production: Average Cost Method
The following information concerns production in the Finishing Department for May. The Finishing Department uses the average cost method.
| ACCOUNT Work in ProcessFinishing Department | ACCOUNT NO. |
| Date | Item | Debit | Credit | Balance |
| | | | | | | | Debit | Credit |
| May | 1 | Bal., 15,500 units, 70% completed | | | | | 62,000 | | |
| | 31 | Direct materials, 76,000 units | 185,440 | | | | 247,440 | | |
| | 31 | Direct labor | 115,000 | | | | 362,440 | | |
| | 31 | Factory overhead | 116,800 | | | | 479,240 | | |
| | 31 | Goods transferred, 80,600 units | | | 461,032 | | 18,208 | | |
| | 31 | Bal., ? units, 35% completed | | | | | 18,208 | | |
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