The following events took place for Smith Bikes during July 2006, the first month of operations, as a producer of road bikes:

1. Purchased $ 340,000 of materials.

2. Used $ 329,000 of direct materials in production.

3. Incurred $ 160,000 of direct labor wages.

4. Applied factory overhead at a rate of 80% of direct labor cost.

5. Transferred $ 590,000 of work in process to finished goods.

6. Sold goods with a cost of $ 550,000.

7. Sold the goods mentioned in (f) above for $ 918,000

8. Incurred $ 132,500 of selling expenses.

9. Incurred $ 80,000 of administrative expenses.

A) Prepare the July income statement for Smith Bikes. Assume that Smith Bikes uses the perpetual inventory method.

B) Determine the inventory balances at the end of the first month of operations.