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 $554,900 of materials.
	Used $477,200 of direct materials in production.
	Incurred $412,000 of direct labor wages.
	Applied factory overhead at a rate of 75% of direct labor cost.
	Transferred $1,150,300 of work in process to finished goods.
	Sold goods with a cost of $1,098,700.
	Revenues earned by selling bikes, $1,966,700.
	Incurred $472,400 of selling expenses.
	Incurred $175,800 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 perpetual inventory method.

Rushmore Biking Inc.
Income Statement
For the Month Ended February 28
Revenues
Cost of goods sold
Gross profit		$fill in the blank 5b51f001afabf92_6
Selling and administrative expenses:
Selling expenses
Administrative expenses
Total selling and administrative expenses
Operating income

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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