Question

$ 36,900 Morrison Company Balance Sheet January 1 Assets Cash Raw materials Work in process Finished goods Prepaid expenses Property, plant, and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Retained earnings Total liabilities and stockholders' equity $11,000 4,650 30,000 45,650 3,425 129,000 $ 214,975 $ 10,600 204,375 $ 214,975 During January the company completed the following transactions: a. Purchased raw materials on account, $84,400. b. Raw materials used in production, $92,800 ($75,800 was direct materials and $17,000 was indirect materials). c. Paid $198,500 of salaries and wages in cash ($107,600 was direct labor, $43,650 was indirect labor, and $47,250 was related to employees responsible for selling and administration). d. Various manufacturing overhead costs incurred on account) to support production, $34,200. e. Depreciation recorded on property, plant, and equipment, $65,600 (70% related to manufacturing equipment and 30% related to assets that support selling and administration). f. Various selling expenses paid in cash, $37,250. g. Prepaid insurance expired during the month, $2,150 (80% related to production, and 20% related to selling and administration). h. Manufacturing overhead applied to production, $136,400. i. Cost of goods manufactured, $301,500. j. Cash sales to customers, $411,240. k. Cost of goods sold (unadjusted), $296,600. I. Cash payments to creditors, $72,200. m. Underapplied or overapplied overhead $? Required: 1. Calculate the ending balances that would be reported on the company's balance sheet on January 31ST (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?

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

Below table helps to calculate the desired results: -

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	36,900	11,000	4,650	30,000	-	3,425	129,000	=	10,600	204,375
(a)	Raw material purchases		84,400						=	84,400
(b)	Raw materials used in production		(92,800)	75,800		17,000			=
(c)	Salaries and wages	(173,600)		107,600		43,650			=		(47,250)
(d)	Various overhead costs					34,200			=	34,200
(e)	Depreciation					45,920		(65,600)	=		(19,680)
(f)	Various selling expenses	(37,250)							=		(37,250)
(g)	Expiration of prepaid insurance					1,720	(2,150)		=		(430)
(h)	Manufacturing overhead applied			136,400		(136,400)			=
(i)	Cost of goods manufactured			(301,500)	301,500				=
(j)	Sales	411,240							=		411,240
(k)	Cost of goods sold				(296,600)				=		(296,600)
(l)	Payments to creditors	(72,200)							=	(72,200)
(m)	Underapplied overhead					(6,090)			=		(6,090)
	Ending balances @ 1/31	165,090	2,600	22,950	34,900	-	1,275	63,400		57,000	208,315
2. Morrison Company’s net operating income for the month of January is:
Particulars											Amount ($)
Sales											411,240
Less: Cost of goods sold											(296,600)
Less: Underapplied Overhead											(6,090)
Gross Profit											108,550
Less: Expenses
Salaries and Wages Expense											(47,250)
Depreciation expense											(19,680)
Various selling expense											(37,250)
Insurance Expense											(430)
											(104,610)
Net Income											3,940