Question - Office World manufactures commercial office furniture.
The following transactions occurred for Office World during the month of January 2010, the first month of the fiscal year.
1. Raw materials were purchased on account for $250,000.
2. Materials costing $215,000 were requisitioned. Of this amount, $195,000 were traced to specific jobs, while the remaining materials were requisitioned for general factory use.
3. Labor of $143,000 was incurred in the factory. Of the total labor costs, $120,000 was traced to specific jobs worked on during the month. Labor has not yet been paid.
4. Depreciation on the plant and equipment for the month was $10,000. Also, $3,500 in prepaid property tax expired during January and a $8,250 utility bill for the plant was received.
5. Office World used the predetermined manufacturing overhead rate of 75% to allocate manufacturing overhead to jobs.
6. Jobs costing $325,000 to manufacture according to the job cost records were completed in January
7. All $465,000 in sales for the month were made on credit. Job cost records indicate the units sold cost $255,000 to manufacture. Assume Office World uses a perpetual inventory system.
8. Operating expenses incurred for the month totaled $100,000. Marketing and administrative salaries accounted for 75% of the operating expenses and the remaining costs were related to lease and utility bills for corporate headquarters.
9. Office World had to close its manufacturing overhead account in order to prepare its January financial statements.
Requirements:
1. Journalize the January transactions for Office World. Explanations are not necessary.
2. Based on the above transactions, prepare the January income statement for Office World.