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) Fuel for construction equipment $1,500

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

Prepare Journal Entries

1) Normal Journal Entries

2) Adjusting Journal Entries

3) Closing Journal Entries

4) T-Account

Answer 1

1. In the books of ABC Company:

Date	Account Titles	Debit	Credit
2018		$	$
June 1	Cash	1,500,000
	Common Stock		1,500,000
June 2	Raw Materials Inventory	300,000
	Cash		100,000
	Accounts Payable		200,000
June 2	Works Overhead	2,000
	Cash		2,000
June 3	Prepaid Insurance	500
	Cash		500
June 3	Construction Equipment	240,000
	Cash		240,000
June 4	Work in Process Inventory	105,000
	Works Overhead	4,500
	Raw Materials Inventory		109,500
June 8	Works Overhead	6,000
	Administrative Salaries Expense	11,000
	Cash		17,000
June 12	Work in Process Inventory	3,000
	Cash		3,000
June 14	Work in Process Inventory	82,500
	Cash		82,500
June 15	Works Overhead	1,500
	Cash		1,500
June 15	Land	50,000
	Building	112,000
	Cash		162,000
June 20	Insurance Expense	1,000
	Cash		1,000
June 21	Work in Proess Inventory	7,700
	Works Overhead		7,700
June 21	Finished Goods Inventory	90,700
	Work in Process Inventory		90,700
June 23	Retained Earnings	5,000
	Dividends Payable		5,000
June 24	Cash	150,000
	Note Receivable	100,000
	Sales		250,000
June 24	Cost of Jobs Sold	90,700
	Finished Goods Inventory		90,700

2. Adjusting Journal Entries:

	Account Titles	Debit	Credit
June 30		$	$
1.	Depreciation Expense	2,500
	Accumulated Depreciation : Building		2,500
2.	Works Overhead ( $ 240,000 - $ 24,000) / ( 9 x 12)	2,000
	Accumulated Depreciation : Costruction Equipment		2,000
3.	Work in Process Inventory	11,550
	Works Overhead		11,550
4.	Works Overhead	3,250
	Cost of Jobs Sold		3,250
5.	Interest Receivable ( $ 9,000 / 12)	750
	Interest Revenue		750