Question

Problem 3A-4 (Algo) Transaction Analysis (LO3-5) Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows: $ 42,000 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 $ 13,600 7,450 18,000 39, 050 2,150 105,000 $ 188, 200 $ 16,900 171, 300 $ 188, 200 During January the company completed the following transactions: a. Purchased raw materials on account, $76,200. b. Raw materials used in production, $84,900 ($68,000 was direct materials and $16,900 was indirect materials). c. Paid $189,450 of salaries and wages in cash ($97,200 was direct labor, $43,200 was indirect labor, and $49,050 was related to employees responsible for selling and administration). d. Various manufacturing overhead costs incurred (on account) to support production, $46,650. e. Depreciation recorded on property, plant, and equipment, $56,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administration). f. Various selling expenses paid in cash, $39,050. g. Prepaid insurance expired during the month, $1,300 (80% related to production, and 20% related to selling and administration). h. Manufacturing overhead applied to production, $140,400. i. Cost of goods manufactured, $303,800. j. Cash sales to customers, $416,840. k. Cost of goods sold (unadjusted), $300,600. 1. Cash payments to creditors, $62,000. m. Underapplied or overapplied overhead_$?

Answer 1

1.

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	42000	13600	7450	18000	0	2150	105000	=	16900	171300
(a)	Raw material purchases		76,200						=	76,200
(b)	Raw materials used in production		-84,900	68,000		16,900			=
(c)	Salaries and wages	-1,89,450		97,200		43,200			=		-49,050
(d)	Various overhead costs					46,650			=	46,650
(e)	Depreciation					39,200		-56,000	=		-16,800
(f)	Various selling expenses	-39,050							=		-39,050
(g)	Expiration of prepaid insurance					1,040	-1,300		=		-260
(h)	Manufacturing overhead applied			1,40,400		-1,40,400			=
(i)	Cost of goods manufactured			-3,03,800	3,03,800				=
(j)	Sales	4,16,840							=		4,16,840
(k)	Cost of goods sold				-3,00,600				=		-3,00,600
(l)	Payments to creditors	-62,000							=	-62,000
(m)	Underapplied overhead					-6,590			=		-6,590
.	Ending balances @ 1/31	168340	4900	9250	21200	0	850	49000	=	77750	175790

2.

Morrison Company’s net operating income for the month of January

Particulars		Amount
Sales		416840
Less: COGS		300600
Less: Underapplied overhead		6590
Gross profit		109650
Less: operating Expenses
Salaries & wages expense	-49050
Depreciation expense	-16800
Selling expense	-39050
Insurance expense	-260	-105160
Net Operating Income		$4490