The following events took place for Wreckin Ronnie Inc. during July 2008, the first month of operations....?

The following events took place for Wreckin Ronnie Inc. during July 2008, the first month of operations as a producer of road bikes:

Purchased $165,800 of materials

Used $147,600 of direct materials in production

Incurred $96,250 of direct labor wages

Applied factory overheat at a rate of 80% of direct labor cost

Transferred $302,900 of work in process to finished goods

Sold goods with a cost of $301,300

Sold goods for $502,000

Incurred 119,900 of selling expenses

Incurred $52,100 of administrative expenses

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

b. Determine the inventory balances at the end of the first month of operations.

Any help on this would be nice! Very confused.

1 Answer

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  • Coco
    Lv 7
    6 years ago
    Favorite Answer

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

    Revenues $502,000

    Cost of Goods Sold 301,000

    Gross Profit 201,000

    Less:

    Selling Expenses 119,900

    Administrative expenses 52,100

    Income from operations $29,000

    b. Determine the inventory balances at the end of the first month of operations.

    Purchased materials $165,800

    Less: Materials used in production 147,600

    Materials inventory, May 31 $18,200

    Work in process inventory:

    Materials used in production $147,600

    Direct labor 96,250

    Factory overhead 77,000 ($96,250 x 80%)

    Additions to work in process $320,850

    Less: Transferred to finished goods 302,900

    Work in process inventory, May 31 $17,950

    Finished goods inventory:

    Transferred to finished goods $302,900

    Less: Cost of goods sold 301,300

    Finished goods inventory, May 31 $1,600

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