Question

Job Order Costing

The ABC Company builds residential housing. The company started operations on June 1^st, 2018. Below are transactions that occurred in the first month of operations (June 2018)

Journal Entries:

June 1) ABC Company sold common stock for $1,500,000 in cash. The company issued 15,000 shares of $100 Par stock.

June 2) ABC Company purchased $300,000 of building materials. Paying $100,000 cash and the rest on account due in 45 days. No credit terms were given.

June 3) ABC Company purchased construction equipment for $240,000 cash. The company uses the straight line method of depreciation. The equipment has a useful life of 9 years and a residual value of $24,000.

June 4) ABC Company started construction on 3 homes (Job 100, 101, 102) by requisitioning the following materials: The materials were delivered to the job sites.

Job Number	Direct Materials	Indirect Materials
100	$50,000	$2,000
101	$30,000	$1,000
102	$25,000	$1,500

June 14) The following direct labor was used and paid for during the period ($30/hour):

Job Number	Amount	Hours
100	$33,000	1100
101	$27,000	900
102	$22,500	750

Predetermined overhead rate calculated May 8, 2018

(Estimated Total Overhead Costs) / (Estimated Direct Labor Hours)

($24,000) / (3000 hours) = $7 per direct labor used

June 21) Job 100 is completed and ready for sale.

The following actual costs were incurred and paid (Except for depreciation transactions listed below) during the month of June:

June 2) Insurance on houses under construction $2,000 (covers up to any number of homes.

June 3) Insurance on anticipated completed homes $500 no matter the number.

June 8) Construction supervisor salary $6,000 (Paid Monthly)

June 8) Company president salary $8,000 (Paid Monthly)

June 8) Administrative staff salaries $3,000 (Paid Monthly)

June 12) Building Permits $3,000

June 15) Purchased land for $50,000 and a building for $112,000 to use as corporate HQ

June 20) Insurance on HQ is $1,000 per month

June 23) Declared a $5,000 cash dividend to be paid on July 23, 2018.

June 24) Job 100 is sold for $250,000; Cash $150,000 & $100,000 note receivable to be received on September 19, 2018. The amount received will be $109,000 principal and interest. The note is a 360 day (One year is 360 days) 9% simple interest note. An adjusting entry must be made for interest revenue earned for the month of June.

June 30) Depreciation for June on HQ Building $2,500

June 30) Depreciation on the construction equipment was _______________

June 30) Apply (Appropriate) overhead to incomplete jobs

June 30) Account for ending balance in Overhead account

Note: All June 30 entries are Adjusting Entries

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JOURNAL ENTRIES

ABC Company
General journal for the month of june 2018
Date	Account Title	Debit	Credit
June.1	Cash	$ 1,500,000.00	?
?	Common Stock	?	$ 1,500,000.00
?	(Issue of 15,000 shares of $100 par stock)	?	?
June.2	Building material	$   300,000.00	?
?	Cash	?	$   100,000.00
?	Account Payable	?	$   200,000.00
?	(purchase of building material for cash and on account)	?	?
June.2	Works Overhead	$      2,000.00	?
?	Cash	?	$      2,000.00
?	(insurance premium paid)	?	?
June.3	Construction Equipment	$   240,000.00	?
?	Cash	?	$   240,000.00
?	(Purchase of construction equipment for cash)	?	?
June.3	Works Overhead	$        500.00	?
?	Cash	?	$        500.00
?	(insurance premium paid)	?	?
June.4	Work-in-process - Job#100	$     50,000.00	?
?	Work-in-process - Job#101	$     30,000.00	?
?	Work-in-process - Job#102	$     25,000.00	?
?	Works overhead	$      4,500.00	?
?	Building material	?	$   109,500.00
?	(Building material issued for construction)	?	?
June.8	Works Overhead	$      6,000.00	?
?	Cash	?	$      6,000.00
?	(Construction supervisor salary)	?	?
June.8	Saalries Expense	$     11,000.00	?
?	Cash	?	$     11,000.00
?	(President's and admn.staff salaries)	?	?
June.12	Works Overhead	$      3,000.00	?
?	Cash	?	$      3,000.00
?	(Building permit )	?	?
June.14	Work-in-process - Job#100	$     33,000.00	?
?	Work-in-process - Job#101	$     27,000.00	?
?	Work-in-process - Job#102	$     22,500.00	?
?	Cash	?	$     82,500.00
?	(Wages paid for direct labor)	?	?
June.15	Land	$     50,000.00	?
?	Building	$   112,000.00	?
?	Cash	?	$   162,000.00
?	(Purchase of land and building for office)	?	?
June.20	Insurance Expense	$      1,000.00	?
?	Cash	?	$      1,000.00
?	(Insurance premium on headquarter)	?	?
June.21	Work-in-process - Job#100	$      7,700.00	?
?	Works Overhead	?	$      7,700.00
?	(Overhead applied at $7 per direct labor hour to Job#100)	?	?
June.21	Completed Jobs	$     90,700.00	?
?	Work-in-process - Job#100	?	$     90,700.00
?	(Cost of job#100 transferred to completed jobs account)	?	?
June.23	Dividend	$      5,000.00	?
?	Dividend Payable	?	$      5,000.00
?	(Declaration of dividend )	?	?
June.24	Cash	$   150,000.00	?
?	Note Receivable	$   100,000.00	?
?	Sales	?	$   250,000.00
?	(Sale of Job#100 building)	?	?
?	Cost of jobs sold	$     90,700.00	?
?	Completed Jobs	?	$     90,700.00
?	(Cost of job#100 sold transferred to cost of jobs sold)	?	?
June.30	Depreciation Expense	$      2,500.00	?
?	Accumulated Depreciation - HQ building	?	$      2,500.00
?	(Depreciation expense on HQ building recorded)	?	?
June.30	Depreciation Expense	$     24,000.00	?
?	Accumulated Depreciation - Construction Equipment	?	$     24,000.00
?	(Depreciation expense on construction equipment)	?	?
June.30	Work-in-process - Job#101	$      6,300.00	?
?	Work-in-process - Job#102	$      5,250.00	?
?	Works Overhead	?	$     11,550.00
?	(Overhead applied at $7 per direct labor hour for Jobs #101 and 102)	?	?
June.30	Works Overhead	$      3,250.00	?
?	Cost of jobs completed	?	$      3,250.00
?	(Overapplied overhead adjusted)	?	?
June.30	Interest Receivable	$        750.00	?
?	Interest Revenue	?	$        750.00
?	(Interest on note receivable at 9% for June recorded)	?	?

Based on the Journal Entries above,

1) Prepare 'Trial Balance'

2) Prepare 'Adjusted Balance'

3) Prepare 'Financial Statement and Worksheets' (Three Trial Balances)

Answer 1

1.

ABC COMPANY
Trial Balance Worksheet as at June 30, 2018
Account	Unadjusted
	Debit	Credit
Cash	1042000
Building Material	190500
Work-in-process	116050
Jobs Completed	0
Note Receivable	100000
Interest Receivable	0
Construction Equipment	240000
Accumulated Depreciation - Construction Equipment		0
Land	50000
Building	112000
Accumulated Depreciation -Building		0
Accounts Payable		200000
Dividend Payable		5000
Common Stock		1500000
Dividend	5000
Sales		250000
Interest Revenue		0
Cost of jobs sold	87450
Works Overhead	0
Salaries Expense	11000
Insurance Expense	1000
Depreciation Expense	0
Income Summary
	1955000	1955000

2.

ABC COMPANY
Trial Balance Worksheet as at June 30, 2018
Account	Adjusted
	Debit	Credit
Cash	1042000
Building Material	190500
Work-in-process	116050
Jobs Completed	0
Note Receivable	100000
Interest Receivable	750
Construction Equipment	240000
Accumulated Depreciation - Construction Equipment		24000
Land	50000
Building	112000
Accumulated Depreciation -Building		2500
Accounts Payable		200000
Dividend Payable
Common Stock		1500000
Dividend
Sales		250000
Interest Revenue		750
Cost of jobs sold	87450
Works Overhead	0
Salaries Expense	11000
Insurance Expense	1000
Depreciation Expense	26500
Income Summary
	1977250	1977250

3.

ABC COMPANY
Trial Balance Worksheet as at June 30, 2018
Account	Adjusted		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	1042000				1042000
Building Material	190500				190500
Work-in-process	116050				116050
Jobs Completed	0				0
Note Receivable	100000				100000
Interest Receivable	750				750
Construction Equipment	240000				240000
Accumulated Depreciation - Construction Equipment		24000				24000
Land	50000				50000
Building	112000				112000
Accumulated Depreciation -Building		2500				2500
Accounts Payable		200000				200000
Dividend Payable						0
Common Stock		1500000				1619800
Dividend
Sales		250000		250000
Interest Revenue		750		750
Cost of jobs sold	87450		87450
Works Overhead	0		0
Salaries Expense	11000		11000
Insurance Expense	1000		1000
Depreciation Expense	26500		26500
Income Summary			124800
	1977250	1977250	250750	250750	1851300	1846300