Reference no: EM132684510

Problem - Financial statements of a manufacturing firm

The following events took place for Fed Inc. during October 2012, the first month of operations as a producer of road bikes:

Purchased $427,000 of materials.

Used $367,500 of direct materials in production.

Incurred $315,000 of direct labor wages.

Applied factory overhead at a rate of 80% of direct labor cost.

Transferred $892,500 of work in process to finished goods.

Sold goods with a cost of $848,750.

Sold goods for $1,500,000.

Incurred $367,500 of selling expenses.

Incurred $131,950 of administrative expenses.

Required -

a. Prepare the October income statement for Fed. Assume that Fed uses the perpetual inventory method.

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