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Bergo Bay's accounting system generated the following account balances on December 31. The companys manager knows something is wrong with this list of balances because it does not show any balance for Work in Process Inventory, and the accrued factory payroll (Factory Wages Payable) has not been recorded.

	Debit	Credit
Cash	$ 76,000
Accounts receivable	45,000
Raw materials inventory	27,500
Work in process inventory	0
Finished goods inventory	12,000
Prepaid rent	4,000
Accounts payable		$ 10,500
Notes payable		13,500
Common stock		40,000
Retained earnings (prior year)		79,000
Sales		188,500
Cost of goods sold	103,000
Factory overhead	26,000
General and administrative expenses	38,000
Totals	$ 331,500	$ 331,500

These six documents must be processed to bring the accounting records up to date.

Materials requisition 10:	$ 4,700	direct materials to Job 402
Materials requisition 11:	$ 7,700	direct materials to Job 404
Materials requisition 12:	$ 2,200	indirect materials
Labor time ticket 52:	$ 7,000	direct labor to Job 402
Labor time ticket 53:	$ 13,000	direct labor to Job 404
Labor time ticket 54:	$ 5,000	indirect labor

Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost.

1. Prepare an income statement for the year and a balance sheet as of December 31. Hint: Retained earnings is $123,300 at the end of the current year.
2. Assume that the $2,200 on materials requisition 12 should have been direct materials charged to Job 404. Does this error result in overstatement or understatement of total assets?

Complete this question by entering your answers in the tabs below.

• Req 4 Income Statement
• Req 4 Balance Sheet
• Req 5

Prepare an income statement.

	BERGO BAY COMPANY Income Statement For Year Ended December 31