Question

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 $400,000 of materials • Used $43,500 of direct materials in production • Incurred $127.600 of direct labor wages • Applied factory overhead at a rate of 50% of direct labor cost. • Transferred $602,100 of work in process to finished goods. • Sold goods with a cost of $573,000. • Revenues earned by selling bikes, $948,000 • Incurred $192,800 of selling expenses. • Incurred $93,700 of administrative expenses This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet a. Prepare the income statement for Rushmore Bloing for the month ending February 28. Round your answers to the nearest dollar. Rushmore Biking Inc. Income Statement For the Month Ended February 28 Check My Work 3 more Check My Work uses remaining Previous

Answer 1

Rushmore Biking Inc.
Income Statement
For the Month Ended February 28
Revenues		$948,000
Cost of goods sold		$573,000
Gross Profit                                                     [$948,000 - $573,000]		$375,000
Selling and Administrative Expenses
Selling expenses	$192,800
Administration expenses	$93,700
Total Selling and Administrative Expenses   [$192,800 + $93,700]		$286,500
Income from Operations                                  [$375,000 - $286,500]		$88,500

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b. Inventory balances:
Materials inventory, February 28              [Materials purchased - Materials used = $490,000 - $443,500]	$46,500
Work-in Process inventory, February 28   [Refer working note 1]	$32,800
Finished Goods inventory, February 28     [Refer working note 2]	$29,100

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Working note 1 -Calculation of Work-in Process inventory balance
Beginining balance of Work-in-process		$0
Direct material used	$443,500
Direct labor wages	$127,600
Factory overhead                           [Direct labor wages x 50% = $127,600 x 72%]	$63,800
Total manufacturing cost                [$443,500 + $127,600 + $63,800]		$634,900
Total cost of work-in-process        [$0 + $634,900]		$634,900
Less: Cost of Work-in-process transferred to finished goods inventory   (= Cost of goods manufactured)		$602,100
Ending balance of Work-in-Process Inventory		$32,800

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Working note 2 - Calculation of Finshed goods inventory balance
Beginning balance of finished goods inventory	$0
Add: Cost of Work-in-process transferred to finished goods inventory   (= Cost of goods manufactured)	$602,100
Cost of goods available for sale                        [$0 + $602,100]	$602,100
Less: Cost of Goods Sold	$573,000
Ending balance of Finished goods Inventory	$29,100