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 $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.

Answer 1

Answer:

Focault Inc

Income statement for the month of July

Sales                                                                     $1,120,000

Less Cost of Goods Sold                                    ($630,000)

Gross Profit                                                           $490,000

Less Expenses

Selling expenses                       $252,800

Administrative expenses           $100,000         ($352,800)

Net Income                                                            $137,200

Explanation:

Income Statement shows the profit earned by the company during the reporting period. Profit = Gross Profit (Sales - Costs of Sales) - Operating Expenses.

Note that the amount  of the cost of goods manufactured that was sold, that is the the cost of goods sold was already given as $630,000, this made our calculations easier.