In: Accounting
Financial Statements of a Manufacturing Firm
The following events took place for Salsa Inc. during June 2016, the first month of operations as a producer of road bikes:
Purchased $302,900 of materials.
Used $260,500 of direct materials in production.
Incurred $224,000 of direct labor wages.
Applied factory overhead at a rate of 75% of direct labor cost.
Transferred $626,400 of work in process to finished goods.
Sold goods with a cost of $605,800.
Sold goods for $1,084,400.
Incurred $260,500 of selling expenses.
Incurred $96,900 of administrative expenses.
a. Prepare the June income statement for Salsa. Assume that Salsa uses the perpetual inventory method.
Salsa Inc. | ||
Income Statement | ||
For the Month Ended June 30, 2016 | ||
$ | ||
$ | ||
$ | ||
$ |
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 | $ |
Salsa Inc. |
||
Income Statement |
||
For the Month Ended June 30, 2016 |
||
Revenue |
$ 1084400 |
|
(-) COGS |
$ 605800 |
|
(-) Selling Exp |
$ 260500 |
|
(-) Admn Exp |
$ 96900 |
$ 357400 |
Net Income |
$ 121200 |
Materials inventory, June 30 |
$ 42400 |
Work in process inventory, June 30 |
$ 26100 |
Finished goods inventory, June 30 |
$ 20600 |
Material Inventory, June 30 :-
Beginning Materials + Purchased Materials - used materials = ending materials inventory
= 0 + 302900 – 260500 = $ 42400
Work in process inventory, June 30 :-
Beginning WIP Inventory + Cost of Goods Manufactured - WIP Inventory transferred out = Ending WIP inventory
= 0 + (260500 + 224000 + (224000 * 75%)) – 626400 = $ 26100
Finished goods inventory, June 30 :-
Beginning Finished Goods Inventory + WIP Inventory transferred in - Cost of Goods Sold = Finished Goods Inventory.
= 0 + 626400 – 605800 = $ 20600