Lane Confectioners  produces special orders of sugar candies and chocolates for airlines and hotels. During March,  Lane purchased, on credit, 2,100 pounds of confectioner’s sugar at $.80 per pound, 2,300 pounds of of caramel at $1.50 per pound from Seattle Confectionery Supply. In addition, it purchased for cash 60 dozen eggs at $.85 per dozen and 90 pounds of paraffin at $.50 per pound from PMG Foods.

The beginning balances in the inventory accounts were:

Raw Materials Inventory.....................................$2,500

Work in Process Inventory....................................6,500

Finished Goods Inventory.....................................9,000

The ending balances in the inventory accounts were:

Raw Materials Inventory.....................................$3,500

Work in Process Inventory....................................5,000

Finished Goods Inventory.....................................6,000

Direct labor costs were $5,400 for 450 hours, indirect labor costs were $2,500, utilities were $400, rent was $750, and other overhead costs totaled $5,000. Manufacturing overhead is applied at $17 per direct labor hour. Sales during the month were $35,000, and selling and administration expenses were $9,000. (Assume that all of the above were noncash transactions.)

Required

a. Prepare journal entries to record the transactions for the month of March. Assume that over or under applied overhead is closed to Cost of Goods Sold.

b. Prepare an income statement for the month of March?