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

1) Show T-Accounts

Answer 1

		T-ACCOUNTS
	CASH
	Date	Description	Debit	Credit
	.June1	Common stock	$1,500,000
	.June2	Purchase		$100,000
	.June3	Purchase of construction equipment		$240,000
	.June14	Direct labor payment		$82,500	(33000+27000+22500)
	.June2	Insurance of underconstruction houses		$2,000
	.June3	Insurance of anticipated completed homes		$500
	.June8	Manufacturing supervisors salary		$6,000
	.June8	Company President salary		$8,000
	.June8	Administrative staff salary		$3,000
	.June12	Building Permit		$3,000
	.June15	Land and building		$162,000
	.June20	Insurance on HQ		$1,000
	.June24	Sale of Job 100	$150,000
	NOTES RECEIVABLE
	Date	Description	Debit	Credit
	.June24	Sales of Job-100	$100,000
	ACCOUNTS RECEIVABLE
	Date	Description	Debit	Credit
	RAW MATERIALS INVENTORY
	Date	Description	Debit	Credit
	.June2	Purchase	$300,000
	.June4	Work in process		$        105,000	(50000+30000+25000)
	.June4	Manufacturing overhead		$            4,500	(2000+1000+1500)
	WORK IN PROCESS
	Date	Description	Debit	Credit
	.June4	Direct Materials-Job100	$50,000
	.June4	Direct Materials-Job101	$30,000
	.June4	Direct Materials-Job102	$25,000
	June14.	Direct Labor-Job 100	$33,000
	June14.	Direct Labor-Job 101	$27,000
	June14.	Direct Labor-Job 102	$22,500
	.June21	Applied overhead -Job100	$        7,700		(1100hours*$7/hour)
	.June21	Transferred to finished goods-Job100		$90,700	(50000+33000+7700)
	.June30	Applied overhead -Job101	$        6,300		(900*7)
	.June30	Applied overhead -Job102	$        5,250		(750*7)
	FINISHED GOODS
	Date	Description	Debit	Credit
	.June21	Transferred from work in process-Job100	$90,700
	.June24	Transferred to Cost of sales-Job 100		$90,700
	EQUIPMENT
	Date	Description	Debit	Credit
	.June3	Cash	$240,000
	LAND AND BUILDING
	Date	Description	Debit	Credit
	.June15	Cash	$162,000
	ACCUMULATED DEPRECIATION
	Date	Description	Debit	Credit
	.June30	Depreciation of HQ building		$2,500
	.June30	Depreciation of Equipment		$            2,000	((240000-24000)/9)*(1/12)
	MANUFACTURING OVERHEAD
	Date	Description	Debit	Credit
	.June 4	Indirect materials	$        4,500
	.June21	Applied overhead -Job100		$            7,700
	.June2	Insurance of underconstruction houses	$2,000
	.June8	Manufacturing supervisors salary	$6,000
	.June30	Depreciation of Equipment	$2,000		((240000-24000)/9)*(1/12)
	.June30	Applied overhead -Job101		$6,300	(900*7)
	.June30	Applied overhead -Job102		$5,250	(750*7)
	.June30	Cost of goods sold	$        4,750
		Ending Balance	$               -
	ACCOUNTS PAYABLE
	Date	Description	Debit	Credit
	.June2	Purchase		$200,000
	DIVIDEND PAYABLE
	Date	Description	Debit	Credit
	.June23	Dividend		$5,000
	COMMON STOCK
	Date	Description	Debit	Credit
	.June1	Issue of 15000 shares at $100 par		$1,500,000
	COST OFGOODS SOLD
	Date	Description	Debit	Credit
	.June24	Finished goods-Job100	$90,700
	.June30	Overapplied overhead		$4,750
	SALES REVENUE
	Date	Description	Debit	Credit
	.June24	Sales of job 100		$250,000
	SALES & ADMINISTRATION EXPENSES
	Date	Description	Debit	Credit
	.June3	Insurance of anticipated completed homes	$500
	.June8	Company President salary	$8,000
	.June8	Administrative staff salary	$3,000
	.June12	Building Permit	$3,000
	.June20	Insurance on HQ	$1,000
	.June30	Depreciation of HQ building	$2,500
	DIVIDEND
	Date	Description	Debit	Credit
	.June23	Dividend Payable	$5,000