Question

Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows:

Morrison Company
Balance Sheet
January 1
Assets
Cash				$	38,400
Raw materials	$	10,200
Work in process		6,900
Finished goods		30,300			47,400
Prepaid expenses					3,275
Property, plant, and equipment (net)					148,000
Total assets				$	237,075
Liabilities and Stockholders’ Equity
Accounts payable				$	10,800
Retained earnings					226,275
Total liabilities and stockholders’ equity				$	237,075

During January the company completed the following transactions:

1. Purchased raw materials on account, $76,400.
2. Raw materials used in production, $85,600 ($66,800 was direct materials and $18,800 was indirect materials).
3. Paid $183,400 of salaries and wages in cash ($101,800 was direct labor, $43,350 was indirect labor, and $38,250 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $46,350.
5. Depreciation recorded on property, plant, and equipment, $73,200 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $28,250.
7. Prepaid insurance expired during the month, $2,050 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $139,400.
9. Cost of goods manufactured, $298,700.
10. Cash sales to customers, $407,600.
11. Cost of goods sold (unadjusted), $294,000.
12. Cash payments to creditors, $74,400.
13. Underapplied or overapplied overhead  $?  .

Required:

1. Calculate the ending balances that would be reported on the company's balance sheet on January 31. (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

SUMMARY OF ACCOUNTS :
transaction	RM	WIP	FOH	FG	CASH	AP	AD&S	PPE
OB	10200	6900		30300	38400	10800		148000
PURCHASES	76400					76400
TO PRODUCTION	-85600	66800	18800
LABOR		101800	43350		-183400		38250
OH MADE ON A/C			46350			46350
DEPRECIATION			51240				21960	-73200
SELLING EXP					-28250		28250
INSURANCE			1640				410
OH APPLIED		139400	-139400
FG TRANSFERRED		-298700		298700
SALES					407600
COGS				-294000
CREDITORS PAID					-74400	-74400
OH UNDER APPLIED			-21980
BALANCE	1000	16200	0	35000	159950	59150	88870	74800
REQ : 2)
Income Statement:
	AMOUNT $
Sales	407600
Less:COGS	-294000
Less: Under App. OH	-21980
GP	91620
Less: Adm & Sel exp.	88870
Net Operating Income	2750
REQ. 1)
Balance Sheet as on Jan 31 :
Assets:
Cash	159950
RM	1000
WIP	16200
FG	35000
Prepaid exp.	1225
PPE NET	74800
Total Assets	288175
Liab. & SH Eq.:
AP	59150
RE	229025
Total Lia & SH Eq	288175