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 $337,100 of materials. Used $289,900 of direct materials in production. Incurred $248,000 of direct labor wages. Applied factory overhead at a rate of 70% of direct labor cost. Transferred $683,000 of work in process to finished goods. Sold goods with a cost of $667,500. Revenues earned by selling bikes, $1,194,800. Incurred $287,000 of selling expenses. Incurred $106,800 of administrative expenses. a. Prepare the income statement for Rushmore Biking Inc. for the month ending February 28. Assume that Rushmore Biking Inc. uses the perpet Rushmore Biking Inc. Income Statement For the Month Ended February 28 Revenues Cost of goods sold Gross profit Selling and administrative expenses: Selling expenses 287,000 Administrative expenses 106,800 Total selling and administrative expenses Operating income Feedback 1,194,800 667,500 527,300 393,800 921,100 X Check My Work a. Both product and period costs must be reported on the income statement and are necessary to measure income. Revenues Cost of goods sold Gross profit For the Month Ended February 28 1,194,800 667,500 527,300 Selling and administrative expenses: Selling expenses 287,000 Administrative expenses 106,800 Total selling and administrative expenses 393,800 Operating income 921,100 X Feedback Check My Work a. Both product and period costs must be reported on the income statement and are necessary to measure income. b. Determine the inventory balances on February 28, the end of the first month of operations. Materials inventory, February 28 Work in process inventory, February 28 Finished goods inventory, February 28 Feedback Check My Work b. Set up T accounts for Materials Inventory, Work in Process Inventory, and Finished Goods Inventory accounts. Feedback Check My Work Partially correct