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. DebitCreditCash$ 70,000 Accounts receivable39,000 Raw materials inventory24,500 Work in process inventory0 Finished goods inventory15,000 Prepaid rent5,000 Accounts payable $ 11,800Notes payable 14,800Common stock 50,000Retained earnings (prior year) 94,000Sales 158,900Cost of goods sold112,000 Factory overhead28,000 General and administrative expenses36,000 Totals$ 329,500$ 329,500 These six documents must be processed to bring the accounting records up to date. Materials requisition 10:$ 4,400direct materials to Job 402Materials requisition 11:$ 7,800direct materials to Job 404Materials requisition 12:$ 2,400indirect materialsLabor time ticket 52:$ 7,000direct labor to Job 402Labor time ticket 53:$ 13,000direct labor to Job 404Labor time ticket 54:$ 5,000indirect labor Jobs 402 and 404 are the only jobs in process at year-end. The predetermined overhead rate is 150% of direct labor cost. 4. Prepare an income statement for the year and a balance sheet as of December 31. Hint: Retained earnings is $99,500 at the end of the current year.5. Assume that the $2,400 on materials requisition 12 should have been direct materials charged to Job 404. Does this error result in overstatement or understatement of total assets? ### BERGO BAY COMPANY#### Income Statement#### For Year Ended December 31The income statement for Bergo Bay Company is organized as a table with several rows, each intended to display a component of the company's financial activities for the year ending on December 31. Here's a detailed description of its structure:1. **Header**: - **Company Name**: BERGO BAY COMPANY - **Statement Type**: Income Statement - **Period**: For Year Ended December 312. **Body**: - This section is intended to list the financial figures for various categories like revenues, expenses, and possibly profits or losses. However, these fields are currently empty or marked with a value of '0'. - There are placeholders for important financial details, but they are not filled in, suggesting this is a template or an unfinished statement.3. **Total**: - At the bottom right, there is a line for the total amount, which currently shows a value of `$0`.This format is typical for income statements, presenting a clear view of the company’s financial performance over a specific period. Income statements typically include categories such as gross revenue, cost of goods sold, gross profit, operating expenses, operating profit, other income and expenses, and net income. However, specific details are absent from this document. **Bergo Bay Company Balance Sheet**As at December 31---**Assets**- [Line for entry] - [Line for entry] - [Line for entry] **Inventories**- [Line for entry] - [Line for entry] - [Line for entry] **Total Assets**: $0---**Liabilities**- [Line for entry] - [Line for entry] **Total Liabilities**: 0---**Equity**- [Line for entry] - [Line for entry] **Total Equity**: 0---**Total Liabilities and Equity**: $0---**Explanation:**This is a blank balance sheet template for Bergo Bay Company, formatted as of December 31. It is divided into three main sections: Assets, Liabilities, and Equity, which are standard components of a balance sheet. Each section provides lines for the entry of specific line items.- **Assets**: Contains lines for various types of assets, including a separate subsection for inventories. - **Liabilities**: Contains lines for listing different types of liabilities.- **Equity**: Provides space to enter equity-related figures. Each section ends with a line for the total, ensuring that the sum of these categories is zero, maintaining the accounting equation balance: **Assets = Liabilities + Equity**. This template allows customization by filling in the specific financial data.

An income statement shows a company's revenues, expenses and profitability over a period of time. It…

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 $ 70,000 Accounts receivable 39,000 Raw materials inventory 24,500 Work in process inventory 0 Finished goods inventory 15,000 Prepaid rent 5,000 Accounts payable $ 11,800 Notes payable 14,800 Common stock 50,000 Retained earnings (prior year) 94,000 Sales 158,900 Cost of goods sold 112,000 Factory overhead 28,000 General and administrative expenses 36,000 Totals $ 329,500 $ 329,500 These six documents must be processed to bring the accounting records up to date. Materials requisition 10: $ 4,400 direct materials to Job 402 Materials requisition 11: $ 7,800 direct materials to Job 404 Materials requisition 12: $ 2,400 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. 4. Prepare an income statement for the year and a balance sheet as of December 31. Hint: Retained earnings is $99,500 at the end of the current year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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	$ 70,000
Accounts receivable	39,000
Raw materials inventory	24,500
Work in process inventory	0
Finished goods inventory	15,000
Prepaid rent	5,000
Accounts payable		$ 11,800
Notes payable		14,800
Common stock		50,000
Retained earnings (prior year)		94,000
Sales		158,900
Cost of goods sold	112,000
Factory overhead	28,000
General and administrative expenses	36,000
Totals	$ 329,500	$ 329,500

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

Materials requisition 10:	$ 4,400	direct materials to Job 402
Materials requisition 11:	$ 7,800	direct materials to Job 404
Materials requisition 12:	$ 2,400	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.

4. Prepare an income statement for the year and a balance sheet as of December 31. Hint: Retained earnings is $99,500 at the end of the current year.
5. Assume that the $2,400 on materials requisition 12 should have been direct materials charged to Job 404. Does this error result in overstatement or understatement of total assets?

### BERGO BAY COMPANY
#### Income Statement
#### For Year Ended December 31

The income statement for Bergo Bay Company is organized as a table with several rows, each intended to display a component of the company's financial activities for the year ending on December 31. Here's a detailed description of its structure:

1. **Header**:
- **Company Name**: BERGO BAY COMPANY
- **Statement Type**: Income Statement
- **Period**: For Year Ended December 31

2. **Body**:
- This section is intended to list the financial figures for various categories like revenues, expenses, and possibly profits or losses. However, these fields are currently empty or marked with a value of '0'.
- There are placeholders for important financial details, but they are not filled in, suggesting this is a template or an unfinished statement.

3. **Total**:
- At the bottom right, there is a line for the total amount, which currently shows a value of `$0`.

This format is typical for income statements, presenting a clear view of the company’s financial performance over a specific period. Income statements typically include categories such as gross revenue, cost of goods sold, gross profit, operating expenses, operating profit, other income and expenses, and net income. However, specific details are absent from this document.

**Bergo Bay Company Balance Sheet**

As at December 31

---

**Assets**

- [Line for entry]
- [Line for entry]
- [Line for entry]

**Inventories**

- [Line for entry]
- [Line for entry]
- [Line for entry]

**Total Assets**: $0

---

**Liabilities**

- [Line for entry]
- [Line for entry]

**Total Liabilities**: 0

---

**Equity**

- [Line for entry]
- [Line for entry]

**Total Equity**: 0

---

**Total Liabilities and Equity**: $0

---

**Explanation:**

This is a blank balance sheet template for Bergo Bay Company, formatted as of December 31. It is divided into three main sections: Assets, Liabilities, and Equity, which are standard components of a balance sheet. Each section provides lines for the entry of specific line items.

- **Assets**: Contains lines for various types of assets, including a separate subsection for inventories.

- **Liabilities**: Contains lines for listing different types of liabilities.

- **Equity**: Provides space to enter equity-related figures.

Each section ends with a line for the total, ensuring that the sum of these categories is zero, maintaining the accounting equation balance: **Assets = Liabilities + Equity**. This template allows customization by filling in the specific financial data.

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