ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 19
EX 19-14 The following events took place for Salsa Inc. during May 2010, the first month of operations as a producer of road bikes:
• Purchased $244,000of materials.
• Used $210,000of direct materials in production.
• Incurred $180,000of direct labor wages.
• Applied factory overhead at a rate of 75% of direct labor cost.
• Transferred $510,000of work in process to finished goods.
• Sold goods with a cost of $485,000.
• Sold goods for $870,000.
• Incurred $210,000of selling expenses.
• Incurred $75,400of administrative expenses.
a. Prepare the May income statement for Salsa. Assume that Salsa uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.
Check: a. Income from operations, $99,600
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