Question

Financial Statements of a Manufacturing Firm

The following events took place for Focault Inc. during July 20Y2, the first month of operations as a producer of road bikes:

• Purchased $463,100 of materials
• Used $398,300 of direct materials in production
• Incurred $344,000 of direct labor wages
• Applied factory overhead at a rate of 70% of direct labor cost
• Transferred $943,800 of work in process to finished goods
• Sold goods with a cost of $916,900
• Sold goods for $1,641,300
• Incurred $394,300 of selling expenses
• Incurred $146,700 of administrative expenses

a. Prepare the July income statement for Focault. Assume that Focault uses the perpetual inventory method.

Focault Inc.
Income Statement
For the Month Ended July 31, 20Y2
		$
		$
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, July 31	$
Work in process inventory, July 31	$
Finished goods inventory, July 31	$

Answer 1

a) Focault Inc. Income Statement For the Month Ended July 31, 20Y2 Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administrative expenses Selling expenses $ (394,300) Administrative expenses $ (146,700) Total selling and administrative expenses Net Income $1,641,300 $ (916,900) $ 724,400 $ (541,000) $ 183,400 b) Materials Inventory, July 31 Work in process Inventory, July 31 Finished Goods Inventory, July 31 $ $ $ 64,800 39,300 26,900 Working Notes Materials Inventory, July 31 Total Material Purchases Less : Materials used Materials Inventory, July 31 $ $ $ 463,100 (398,300) 64,800

Work in process Inventory, July 31 Total cost of materials Used Direct labour cost Factory Overhead ($ 344000 * 70%) Total Manufacturing cost Amount of Work in process transferred to finished goods Work in process Inventory, July 31 $ $ $ $ 398,300 344,000 240,800 983,100 $ $ (943,800) 39,300 Finished Goods Inventory, July 31 Amount of Work in process transferred to finished goods Less: Cost of Goods Sold Finished Goods Inventory , July 31 $ $ $ 943,800 (916,900) 26,900 Note: There will be no work in Beginning rawmaterials, work in process, finished inventory in the first month of operations.