Question

Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows: $ 37,350 $12,200 7.300 Morrison Company Balance Sheet January 1 Assets Cash Row 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 56.000 2.900 107.000 $ 200, 250 $ 14.700 During January the company completed the following transactions

Answer 1

Solution

Morrison Company

1. Calculation of ending balances to be reported on the company’s balance sheet on January 31^st:

	Cash	Raw Materials	Work in Process	Finished Goods	Manufacturing Overhead	Prepaid Expenses	Property and Equipment	Accounts Payable	Retained Earnings
Beginning balances	$37,350	$17,200	$7,300	31,500		2,900	107,000	14,700	188,550
Raw Material Purchases		82,200						82,200
Raw Materials used in Production		-94,700	75,000		19,700
Salaries and Wages	-194,700		103,800		43,800				-47,100
Manufacturing overhead costs					43,350			43,350
Depreciation					39,760		-39,760		-17,040
Selling Expenses	-37,100								-37,100
Insurance Expense					1,440	-1,800			-360
Applied Manufacturing Overhead			138,600		-138,600
Cost of Goods Manufactured			-299,400	299,400
Cash Sales	409,280								409,280
Cost of goods sold				-295,200					-295,200
Cash payment to creditors	-64,800							-64,800
Under applied overhead					-9,450				-9,450
Ending Balance	150,030	4,700	25,300	35,700		1,100	67,240	75,450	191,580

Underpapplied overhead = $9,450

2. Computation of the company’s net operating income for the month of January:

Net income for the period = ending retained earnings balance – beginning retained earnings balance

= $191,580 - $188,550 = $3,030