Problem 3A-4 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:

Morrison Company
Balance Sheet
January 1
Assets
Cash				$	40,950
Raw materials	$	15,500
Work in process		4,350
Finished goods		19,350			39,200
Prepaid expenses					3,050
Property, plant, and equipment (net)					160,000
Total assets				$	243,200
Liabilities and Stockholders Equity
Accounts payable				$	11,000
Retained earnings					232,200
Total liabilities and stockholders equity				$	243,200

During January the company completed the following transactions:

1. Purchased raw materials on account, $82,600.
2. Raw materials used in production, $91,300 ($78,200 was direct materials and $13,100 was indirect materials).
3. Paid $195,000 of salaries and wages in cash ($104,400 was direct labor, $44,250 was indirect labor, and $46,350 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $34,650.
5. Depreciation recorded on property, plant, and equipment, $78,000 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $36,350.
7. Prepaid insurance expired during the month, $1,900 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $144,400.
9. Cost of goods manufactured, $296,600.
10. Cash sales to customers, $405,080.
11. Cost of goods sold (unadjusted), $292,200.
12. Cash payments to creditors, $81,600.
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 Companys net operating income for the month of January?

Morrison Company Transaction Analysis For the Month Ended January 31 Raw Materials Work in Process pp&E (netPayable Earnings Finished Manufacturing Prepaid Accounts Retained Transactions Cash Goods Overhead Expenses Beginning balances @1/1 $ 40,950$15,500$4,350 $ 19,350 0 $3,050$160,000 11,000 232,200 (a) Raw material purchases (b) Raw materials used in production (c) Salaries and wages (d) Various overhead costs (e) Depreciation (f) Various selling expenses (g) Expiration of prepaid insurance (h) Manufacturing overhead applied () Cost of goods manufactured 0) Sales (k) Cost of goods sold () Payments to creditors (m) Underapplied overhead 82,600 82,600 (91,300) 78,200 13,100 44,250 34,650 (195,000) 104,400 (44,250) (36,350) 144,400 (296,600) 296,600 405,080 (292,200) (81,600) Ending balances 1/31 Complete this question by entering your answers in the tabs below Required 1Required 2 What is Morrison Company's net operating income for the month of January? Net operating income K Required 1 Required 2