Reference no: EM132728481

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 $200,700 of materials.

Used $172,600 of direct materials in production.

Incurred $148,000 of direct labor wages.

Applied factory overhead at a rate of 70% of direct labor cost.

Transferred $407,200 of work in process to finished goods.

Sold goods with a cost of $395,400.

Revenues earned by selling bikes, $707,800.

Incurred $170,000 of selling expenses.

Incurred $63,300 of administrative expenses.

Required -

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.

b. Determine the inventory balances on February 28, the end of the first month of operations.