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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

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 $320,000 of materials

• Used $275,000 of direct materials in production

• Incurred $236,000 of direct labor wages

• Applied factory overhead at a rate of 75% of direct labor cost

• Transferred $652,000 of work in process to finished goods

• Sold goods with a cost of $630,000

• Sold goods for $1,120,000

• Incurred $252,800 of selling expenses

• Incurred $100,000 of administrative expenses

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

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

(a)

To determine

Income statement:

The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

To prepare: the income statement for Company F.

Explanation

The income statement for Company F is prepared as follows:

...
Company F
Income statement
For the month ended July 31
  Amount
($)
Amount
($)
Revenues   1,120,000
Less: Cost of goods sold   630,000
Gross profit

(b)

To determine
the inventory balance at the end of the first month of operations for company F.

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