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				$	40,500
Raw materials	$	15,100
Work in process		6,300
Finished goods		22,650			44,050
Prepaid expenses					3,200
Property, plant, and equipment (net)					140,000
Total assets				$	227,750
Liabilities and Stockholders’ Equity
Accounts payable				$	12,100
Retained earnings					215,650
Total liabilities and stockholders’ equity				$	227,750

During January the company completed the following transactions:

1. Purchased raw materials on account, $92,400.
2. Raw materials used in production, $99,000 ($81,200 was direct materials and $17,800 was indirect materials).
3. Paid $196,950 of salaries and wages in cash ($112,200 was direct labor, $39,150 was indirect labor, and $45,600 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $40,200.
5. Depreciation recorded on property, plant, and equipment, $70,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $35,600.
7. Prepaid insurance expired during the month, $2,000 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $139,200.
9. Cost of goods manufactured, $303,000.
10. Cash sales to customers, $413,760.
11. Cost of goods sold (unadjusted), $298,400.
12. Cash payments to creditors, $62,400.
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?

Answer 1

Part-1
	Cash	Raw Maaterial	WIP	Finished Goods	Manufacturing Overhead	Prepaid Expenses	PPE Net	Accounts Payable	Retained Earning
Beginning balance as 1/1	$40,500	$15,100	$6,300	$22,650		$3,200	$1,40,000	$12,100	$2,15,650
Raw Material Purchased		$92,400						$92,400
Raw Maaterial Used in Production		-$99,000	$81,200		$17,800
Salaries and wages	-$1,96,950		$1,12,200		$39,150				-$45,600
utility cost					$40,200			$40,200
Depreciation					$49,000		-$70,000		-$21,000
Selling	-$35,600								-$35,600
Expiration of prepaid insurance					$1,600	-$2,000			-$400
Manufacturing overhead applied			$1,39,200		-$1,39,200
Cost of Goods manufactured			-$3,03,000	$3,03,000
Sale	$4,13,760								$4,13,760
Cost of Goods Sold				-$2,98,400					-$2,98,400
Payments to creditors	-$62,400							-$62,400
Over applied overheads					-$8,550				-$8,550
Ending balance 31/1	$1,59,310	$8,500	$35,900	$27,250	$0	$1,200	$70,000	$82,300	$2,19,860

Net operating Income for the month=219860-215650=$4210

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