Problem 3A-4 (Algo) 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				$	46,200
Raw materials	$	15,300
Work in process		7,550
Finished goods		25,800			48,650
Prepaid expenses					2,225
Property, plant, and equipment (net)					126,000
Total assets				$	223,075
Liabilities and Stockholders Equity
Accounts payable				$	13,800
Retained earnings					209,275
Total liabilities and stockholders equity				$	223,075

During January the company completed the following transactions:

1. Purchased raw materials on account, $85,600.
2. Raw materials used in production, $96,800 ($77,000 was direct materials and $19,800 was indirect materials).
3. Paid $182,350 of salaries and wages in cash ($95,200 was direct labor, $35,250 was indirect labor, and $51,900 was related to employees responsible for selling and administration).
4. Various manufacturing overhead costs incurred (on account) to support production, $37,650.
5. Depreciation recorded on property, plant, and equipment, $64,400 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).
6. Various selling expenses paid in cash, $41,900.
7. Prepaid insurance expired during the month, $1,350 (80% related to production, and 20% related to selling and administration).
8. Manufacturing overhead applied to production, $138,600.
9. Cost of goods manufactured, $302,900.
10. Cash sales to customers, $415,440.
11. Cost of goods sold (unadjusted), $299,600.
12. Cash payments to creditors, $80,200.
13. Underapplied or overapplied overhead $? .

Required:

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