Financial Statements of a Manufacturing Firm The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes: • Purchased $605,700 of materials.
• Used $520,900 of direct materials in production.
• Incurred $448,000 of direct labor wages.
• Applied factory overhead at a rate of 80% of direct labor cost.
• Transferred $1,274,200 of work in process to finished goods.
• Sold goods with a cost of $1,211,400.
• Revenues earned by selling bikes, $2,168,400.
• Incurred $520,900 of selling expenses.
• Incurred $193,800 of administrative expenses.
a. Prepare the income statement for Rushmore Biking Inc. for the month ending February 28. Assume that Rushmore Biking Inc. uses the perpetual inventory method.
Rushmore Biking Inc.
Income Statement
For the Month Ended February 28
Selling and administrative expenses:
Total selling and administrative expenses
b. Determine the inventory balances on February 28, the end of the first month of operations,
Materials inventory, February 28
Work in process inventory, February 28
Finished goods inventory, February 28
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a.Net Income  $ 242,300

Materials inventory, February 28=  $ 84,800

Work in process inventory, February 28=  $ 53,100

Finished goods inventory, February 28= $ 62800

Explanation:

Rushmore Biking Inc.

Income Statement

For the Month of February

                                                    Debit                       Credit

Sales  Revenue                                                  $  2,168,400

Direct Materials                  $520,900

Direct Labor                       $448,000

Applied factory overhead $ 358,400

Total Manufacturing Costs  $ 1327,300

Less Closing Work In Process $ 53,100

Cost Of Goods Manufactured     $1,274,200

Less Finished Goods Ending Inventory $ 62800

Cost Of Goods Sold                                                   ($1,211,400)

Gross Profit                                                                 $ 957,000

Less

Selling Expenses             $520,900

Administrative Expenses  $193,800                        ( $ 714,700)    

Net Income                                                               $ 242,300

b.

Materials inventory, February 28= Purchased Less Used

      = $605,700- $520,900 =  $ 84,800

Work in process inventory, February 28=  Total Manufacturing Costs  Less Cost Of Goods Manufactured

$ 1327,300-$1,274,200= $ 53,100

Finished goods inventory, February 28 =    Cost Of Goods Manufactured Less Cost Of Goods Sold

$1,274,200 - $1,211,400= $ 62800

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