Question

Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows: 37,950 $ 9,999 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 8,350 31,800 50,050 2,600 120,000 $ 210,600 $ 16,200 194,400 $ 210,600 During January the company completed the following transactions: a. Purchased raw materials on account, $80,400. b. Raw materials used in production, $86,600 ($70.600 was direct materials and $16,000 was indirect materials). c. Paid $ 210.950 of salaries and wages in cash ($113,600 was direct labor, $47,550 was indirect labor, and $49,800 was related to employees responsible for selling and administration) d. Various manufacturing overhead costs incurred (on account) to support production, $39.750

  

Answer 1

1. Ending balances that would be reported on the company's balance sheet on January 31st is as shown below:

Transactions	Cash	Raw Materials	Work in Process	Finished Goods	Manufacturing Overhead	Prepaid Expenses	PP&E (net)	=	Accounts Payable	Retained Earnings
	Beginning balances @1/1	37,950	9,900	8,350	31,800	$ 0	2.600	120,000	=	16,200	194,400
(a)	Raw material purchases		80,400						=	80,400
(b)	Raw materials used in production		-86,600	70,600		16,000			=
(c)	Salaries and wages	-210,950		113,600		47,550			=		-49,800
(d)	Various overhead costs					39,750			=	39,750
(e)	Depreciation					43,400		-62,000	=		-18,600
(f)	Various selling expenses	-39,800							=		-39,800
(g)	Expiration of prepaid insurance					1,280	-1,600		=		-320
(h)	Manufacturing overhead applied			146,000		-146,000			=
(i)	Cost of goods manufactured			-303,400	303,400				=
(j)	Sales	415,440							=		415,440
(k)	Cost of goods sold				-299,600				=		-299,600
(l)	Payments to creditors	-73,000							=	-73,000
(m)	Underapplied overhead					-1,980			=		-1,980
	Ending balances @ 1/31	129,640	3,700	35,150	35,600	$ 0	1,000	58,000		63,350	199,740

2.  Morrison Company’s net operating income for the month of January is:

Particulars	Amount ($)
Sales	415,440
Less: Cost of goods sold	-299,600
Less: Underapplied Overhead	-1,980
Gross Profit	113,860
Less: Expenses
Salaries and Wages Expense	-49,800
Depreciation expense	-18,600
Various selling expense	-39,800
Insurance Expense	-320
	-108,520
Net Income	5,340