Question

Bergamo Bay's computer system generated the following trial balance on December 31, 2017. The company’s manager knows something is wrong with the trial balance because it does not show any balance for Work in Process Inventory but does show a balance for the Factory Overhead account. In addition, the accrued factory payroll (Factory Payroll Payable) has not been recorded.

		Debit			Credit
Cash	$	56,000
Accounts receivable		35,000
Raw materials inventory		22,500
Work in process inventory		0
Finished goods inventory		9,000
Prepaid rent		3,000
Accounts payable				$	10,000
Notes payable					13,000
Common stock					30,000
Retained earnings					77,000
Sales					177,500
Cost of goods sold		110,000
Factory overhead		28,000
Operating expenses		44,000
Totals	$	307,500		$	307,500

After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date.

Materials requisition 21-3010:		$	4,200	direct materials to Job 402
Materials requisition 21-3011:		$	7,500	direct materials to Job 404
Materials requisition 21-3012:		$	1,700	indirect materials
Labor time ticket 6052:		$	3,000	direct labor to Job 402
Labor time ticket 6053:		$	10,000	direct labor to Job 404
Labor time ticket 6054:		$	2,000	indirect labor

Jobs 402 and 404 are the only units in process at year-end. The predetermined overhead rate is 100% of direct labor cost

Prepare an income statement for 2017 and a balance sheet as of December 31, 2017.

Answer 1

Income Statement:
Sales revenue					177500
Less: Adjusted Cost f goods sold (110000+18700)					128700
Gross margin					48800
Less: Operating expensess					44000
Net Income					4800
Balance Sheet:
Assets
Cash			56000
Accounts receivable			35000
Raw material			9100
Work in process inventory			37700
Finished Goods invnentory			9000
Prepaid rent			3000
Total Assets			149800
Liabilities and St equity
Liabilities:
Accounts payable		10000
Notes payable		13000
Wages payable		15000
Total Liabilities			38000
Stockholder's equity
Common Stock		30000
Retained earnings (77000+4800)		81800
Total Stockholdere's equity			111800
Total Liabilities and Equity			149800
Note:
Raw material
beginning balancec				22500
Less: Requisition (4200+7500+1700)				13400
Ending balance of Raw material				9100
Work in process inventory:
		402	404
Material		4200	7500
labour		3000	10000
Overheads		3000	10000
Total cost		10200	27500
Cost of WIP = 10200+27500= 37700