Problem
Financial statements of a manufacturing firm
The following event took place for Chi-Lite Inc. during June 2016, the first month of operations as a producer of road bikes:
• Purchased $400,000 of materials.
• Used $343,750 of direct materials in production.
• Incurred $295,000 of direct labor wages.
• Applied factory overhead at a rate of 75% of direct labor cost.
• 'Transferred $015,000 of work in p100055 10 finished goods.
• Sold goods with a cost of $789,000.
• Sold goods for $1,400,000.
• Incurred $316,000 of selling expenses.
• Incurred $125,000 of administrative expenses.
a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.