The following events took place for Chi-Lite Inc. during June 2016, the first month of operations as a producer of road bikes:

• Purchased $400,000 of materials.

• Used $343,750 of direct materials in production.

• Incurred $295,000 of direct labor wages.

• Applied factory overhead at a rate of 75% of direct labor cost.

• Transferred $815,000 of work in process to finished goods.

• Sold goods with a cost of $789,000.

• Sold goods for $1,400,000.

• Incurred $316,000 of selling expenses.

• Incurred $125,000 of administrative expenses.

a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method.

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