The Following Are All of the Accounts of Flaherty Company

question 203

Essay

The following are all of the accounts of Flaherty Company that have a balance at the end of August.All accounts have normal balances:
$\begin{array}{|l|r|l|r|}\hline \text { Accounts receivable } & \$ 36,000 & \text { Cash } & \$ 27,000 \\\hline \text { Equipment } & 59,000 & \text { Advertising expense } & 5,000 \\\hline \text { Service revenues earmed } & 75,000 & \text { Accounts payable } & 31,000 \\\hline \text { Rent expense } & 3,600 & \text { Dividends } & 24,000 \\\hline \text { Office supplies } & 1,500 & \text { Salaries expense } & 30,000 \\\hline \text { Notes payable } & 22,000 & \text { Common stock } & 20,000 \\\hline & & \text { Retained earnings } & 58,100 \\\hline\end{array}$


a.Calculate net income
b.Determine the amount of retained earnings to be shown on the August 31 balance sheet.

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Definitions:

Indirect Labor Costs

Wages paid to employees who are not directly involved in production work but who support the production process.

Factory Overhead Account

Represents all the indirect costs associated with running a production facility that are not directly tied to a specific product.

Overhead Allocation Base

A measure used to distribute overhead costs to various products or service units within a business.

Overhead Costs

Indirect expenses related to the operation of a business, such as utilities, rent, and administrative salaries, not directly tied to a specific product or service.