Required information

Skip to question

$[$The following information applies to the questions displayed below.$]$

Bergo Bay's accounting system generated the following account balances on December $31.$ The company$$s 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 $ $72,000$

Accounts receivable $41,000$

Raw materials inventory $25,500$

Work in process inventory $0$

Finished goods inventory $12,000$

Prepaid rent $4,000$

Accounts payable $ $10,000$

Notes payable $13,000$

Common stock $40,000$

Retained earnings $($prior year$)93,000$

Sales $170,500$

Cost of goods sold $105,000$

Factory overhead $25,000$

General and administrative expenses $42,000$

Totals $ $326,500$ $ $326,500$

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

Materials requisition $10$: $ $4,900$ direct materials to Job $402$

Materials requisition $11$: $ $7,500$ direct materials to Job $404$

Materials requisition $12$: $ $1,700$ indirect materials

Labor time ticket $52$: $ $8,000$ direct labor to Job $402$

Labor time ticket $53$: $ $12,000$ 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.

Prepare an income statement for the year and a balance sheet as of December $31.$ Hint: Retained earnings is $$114,800$ at the end of the current year.

Assume that the $$1,700$ on materials requisition $12$ should have been direct materials charged to Job $404.$ Does this error result in overstatement or understatement of total assets?