Question

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				$	40,950
Raw materials	$	17,800
Work in process		6,600
Finished goods		31,800			56,200
Prepaid expenses					3,350
Property, plant, and equipment (net)					124,000
Total assets				$	224,500
Liabilities and Stockholders’ Equity
Accounts payable				$	7,100
Retained earnings					217,400
Total liabilities and stockholders’ equity				$	224,500

During January the company completed the following transactions:

1. Purchased raw materials on account, $75,200.
2. Raw materials used in production, $91,500 ($80,200 was direct materials and $11,300 was indirect materials).
3. Paid $202,100 of salaries and wages in cash ($108,800 was direct labor, $41,700 was indirect labor, and $51,600 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $43,350.
5. Depreciation recorded on property, plant, and equipment, $63,600 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $41,600.
7. Prepaid insurance expired during the month, $2,100 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $138,600.
9. Cost of goods manufactured, $309,200.
10. Cash sales to customers, $422,160.
11. Cost of goods sold (unadjusted), $304,400.
12. Cash payments to creditors, $64,200.
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

Answer:

Part-1
	Cash	Raw Maaterial	WIP	Finished Goods	Manufacturing Overhead	Prepaid Expenses	PPE Net	Accounts Payable	Retained Earning
Beginning balance as 1/1	$40950	$17800	$6600	$31800		$3350	$124000	$7100	$217400
Raw Material Purchased		$75200						$75200
Raw Maaterial Used in Production		-$91500	$80200		$11300
Salaries and wages	-$202100		$108800		$41700				-$51600
utility cost					$43350			$43350
Depreciation					$44520		-$63600		-$19080
Selling	-$41600								-$41600
Expiration of prepaid insurance					$1680	-$2100			-$420
Manufacturing overhead applied			$138600		-$138600
Cost of Goods manufactured			-$309200	$309200
Sale	$422160								$422160
Cost of Goods Sold				-$304400					-$304400
Payments to creditors	-$64200							-$64200
Over applied overheads					-$3950				-$3950
Ending balance 31/1	$155210	$1500	$25000	$36600	$0	$1250	$60400	$61450	$218510

Net operating Income for the month=218510-217400=$1110

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