Question

Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows: $ 40,650 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 $11,600 6,350 19,500 37,450 2,300 141,000 $221,400 $ 8,400 213,000 $ 221,400 During January the company completed the following transactions: a. Purchased raw materials on account, $81,400. b. Raw materials used in production, $88,900 ($75,600 was direct materials and $13,300 was indirect materials). c. Paid $189,800 of salaries and wages in cash ($99,200 was direct labor, $49,500 was indirect labor, and $41,100 was related to employees responsible for selling and administration). d. Various manufacturing overhead costs incurred (on account) to support production, $46,050. e. Depreciation recorded on property, plant, and equipment, $70,400 (70% related to manufacturing equipment and 30% related to assets that support selling and administration). f. Various selling expenses paid in cash, $31,100. g. Prepaid insurance expired during the month, $1,400 (80% related to production, and 20% related to selling and administration). h. Manufacturing overhead applied to production, $141,400. i. Cost of goods manufactured, $296,600. j. Cash sales to customers, $406,480. k. Cost of goods sold (unadjusted). $293,200. 1. Cash payments to creditors, $71,400. m. Underapplied or overapplied overhead_$? Required: 1. Calculate the ending balances that would be reported on the company's balance sheet on January 31S. (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? Complete this question by entering your answers in the tabs below. Required 1 Required 2

Answer 1

Morrison Company Transaction Analysis For The Month Ended January 31
	Cash	Raw materials	Work in process	Finished goods	Manufacturing overhead	Prepaid expenses	PP&E (net)	=	Accounts payable	Retained earnings
Beginning balance@1/1	$40,650	$11,600	$6,350	$19,500	$0	$2,300	$141,000		$8,400	$213,000
Raw material purchases		81,400							81,400
Raw material used in production		-88,900	75,600		13,300
Salaries and wages	-189,800		99,200		49,500					-41,100
Various overhead cost					46,050				46,050
Depreciation					49,280		-70,400			-21,120
Various selling expenses	-31,100									-31,100
Expiration of prepaid insurance					1,120	-1,400				-280
Manufacturing overhead applied			141,400		-141,400
Cost of goods manufactured			-296,600	296,600
Sales	406,480									406,480
Cost of goods sold				-293,200						-293,200
Payments to creditors	-71,400								-71,400
Underapplied overhead					-17,850					-17,850
Ending balances@1/31	$154,830	$4,100	$25,950	$22,900	$0	$900	$70,600	=	$64,450	$214,830

2.

Sales		$406,480
Cost of goods sold ($293,200+17,850)		-311,050
Gross profit		95,430
Operating Expenses:
Depreciation expenses	$21,120
Salaries and wages	41,100
Other selling expenses	31,100
Insurance expense	280
Total operating expenses		-93,600
Net operating income		$1,830