Question

Job order cost accounting for a service company

The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July:

July 3. Charged 450 hours of professional (lawyer) time at a rate of $240 per hour to the Obsidian Co. breech of contract suit to prepare for the trial

10. Reimbursed travel costs to employees for depositions related to the Obsidian case, $14,300

14. Charged 330 hours of professional time for the Obsidian trial at a rate of $250 per hour

18. Received invoice from consultants Wadsley and Harden for $71,100 for expert testimony related to the Obsidian trial

27. Applied office overhead at a rate of $50 per professional hour charged to the Obsidian case

31. Paid administrative and support salaries of $27,700 for the month

31. Used office supplies for the month, $9,400

31. Paid professional salaries of $171,000 for the month

31. Billed Obsidian $360,000 for successful defense of the case

a. Provide the journal entries for each of these transactions.

July 3

July 10

July 14

July 18

July 27

July 31 Admin. sal.

July 31 Supplies

July 31 Prof. sal.

July 31 Billed

July 31 Cost

b. How much office overhead is over- or underapplied? Enter your answer as a positive number.

$

c. Determine the gross profit on the Obsidian case, assuming that over- or underapplied office overhead is closed monthly to cost of services.

$

Answer 1

	Date	General Journal				Debit	Credit
	3-Jul	Work in process				108000
		Salaries payable					108,000
	10-Jul	Work in process				14,300
		cash					14,300
	14-Jul	Work in process				82500
		Salaries payable					82,500
	18-Jul	work in process				71,100
		Consultant fees payable					71,100
	27-Jul	Work in process				39000
		office overhead					39,000
	31-Jul	office overhead				27,700
		Cash					27,700
	31-Jul	office overhead				9,400
		Supplies					9,400
	31-Jul	Salaries payable				171,000
		cash					171,000
	31-Jul	Accounts receivable				360,000
		Fees earned					360,000
	31-Jul	Cost of services				314,900
		work in process					249,000
	b)	office overhead over applied				1,900
	c)	Gross profit				47,000
		(360000 - (314900-1900)