Hawkins Bikes, Inc. is a producer of road bikes. During July 20Y6, the company's first month of operations, the following events took place:

• Purchased $170,000 of materials.
• Used $164,500 of direct materials in production.
• Incurred $80,000 of direct labor wages.
• Applied factory overhead at a rate of 75% of direct labor cost.
• Transferred $295,000 of work in process to finished goods.
• Sold goods with a cost of $275,000.
• Sold goods for $459,000.
• Incurred $66,250 of selling expenses.
• Incurred $40,000 of administrative expenses.

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a.  Prepare the July income statement for Hawkins Bikes Inc. Assume that Hawkins Bikes uses the perpetual inventory method.

Hawkins Bikes Inc.
Income Statement
For the Month Ended July 31, 20Y6

Line Item Description	Amount	Amount
CashGross profitIncome from operationsRevenuesSelling expensesRevenues		$Revenues
Administrative expensesCashCost of goods soldGross profitIncome from operationsCost of goods sold		Cost of goods sold
Cost of goods soldGross profitIncome from operationsRevenuesSelling expensesGross profit		$Gross profit
Cost of goods soldGross profitIncome from operationsRevenuesSelling expensesSelling expenses	$Selling expenses
Administrative expensesCost of goods soldGross profitIncome from operationsRevenuesAdministrative expenses	Administrative expenses	blank
blank	blank	fill in the blank 7284e20acfc4f9b_11
Administrative expensesCost of goods soldGross profitIncome from operationsRevenuesIncome from operations		$Income from operations

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Revenues less the cost of goods sold is equal to gross profit. Gross profit less the selling and administrative expenses is equal to the income from operations.

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b.  Determine the inventory balances at the end of the first month of operations.

Line Item Description	Amount
Materials inventory	$fill in the blank 2e9afbfa9fb9078_1
Work-in-process inventory	$fill in the blank 2e9afbfa9fb9078_2
Finished goods inventory	$fill in the blank 2e9afbfa9fb9078_3

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Lets address each part of the question step by step a Prepare the July income statement for Hawkins Bikes Inc 1 Calculating Cost of Goods Manufactured ... View the full answer