Question

Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows:

Morrison Company
Balance Sheet
January 1
Assets
Cash				$	37,950
Raw materials	$	9,900
Work in process		8,350
Finished goods		31,800			50,050
Prepaid expenses					2,600
Property, plant, and equipment (net)					120,000
Total assets				$	210,600
Liabilities and Stockholders’ Equity
Accounts payable				$	16,200
Retained earnings					194,400
Total liabilities and stockholders’ equity				$	210,600

During January the company completed the following transactions:

1. Purchased raw materials on account, $80,400.
2. Raw materials used in production, $86,600 ($70,600 was direct materials and $16,000 was indirect materials).
3. Paid $210,950 of salaries and wages in cash ($113,600 was direct labor, $47,550 was indirect labor, and $49,800 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $39,750.
5. Depreciation recorded on property, plant, and equipment, $62,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $39,800.
7. Prepaid insurance expired during the month, $1,600 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $146,000.
9. Cost of goods manufactured, $303,400.
10. Cash sales to customers, $415,440.
11. Cost of goods sold (unadjusted), $299,600.
12. Cash payments to creditors, $73,000.
13. Underapplied or overapplied overhead  $?  .

Required:

1. Calculate the ending balances that would be reported on the company's balance sheet on January 31^st. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.)

2. What is Morrison Company’s net operating income for the month of January?

Calculate the ending balances that would be reported on the company's balance sheet on January 31^st. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.) (Amounts to be deducted should be indicated by a minus sign.)

Morrison Company Transaction Analysis For the Month Ended Jaunary 31 Transactions Cash Raw Materials Work in Process Finished Goods Manufacturing Overhead Prepaid Expenses PP&E (net) = Accounts Payable Retained Earnings Beginning balances @1/1 $37,950 $9,900 $8,350 $31,800 $0 $2,600 $120,000 = $16,200 $194,400 (a) Raw material purchases = (b) Raw materials used in production = (c) Salaries and wages = (d) Various overhead costs = (e) Depreciation = (f) Various selling expenses = (g) Expiration of prepaid insurance = (h) Manufacturing overhead applied = (i) Cost of goods manufactured = (j) Sales = (k) Cost of goods sold = (l) Payments to creditors = (m) = Ending balances @ 1/31 $58,000

What is Morrison Company’s net operating income for the month of January?

	Net operating income

Answer 1