The following events took place for Wreckin Ronnie Inc. during July2008, the first month of operations as a producer of road bikes:
* Purchased $165,800 of materials.
* Used $147,600 of direct materials in production.
* Incurred $96,250 of direct labor wages.
* Applied factory overhead at a rate of 80% of direct labor cost.
* Transferred $302,900 of work in process to finished goods.
* Sold goods with a cost of $301,300.
* Sold goods for $520,000.
* Incurred $119,000 of selling expenses.
* Incurred $52,100 of administrative expenses.
a. Prepare the July income statement for Wreckin Ronnie. Assume that Wreckin Ronnie uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.