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

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ABC

COMPANY
Trial Balance Worksheet as at June 30, 2018
?	?	?	?	?	?	?
Account	Adjusted		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$ 1,040,500.00	?	?	?	$ 1,040,500.00	?
Building Material	$   190,500.00	?	?	?	$   190,500.00	?
Work-in-process	$   116,050.00	?	?	?	$   116,050.00	?
Jobs Completed	$               -	?	?	?	$               -	?
Note Receivable	$   100,000.00	?	?	?	$   100,000.00	?
Interest Receivable	$         750.00	?	?	?	$         750.00	?
Construction Equipment	$   240,000.00	?	?	?	$   240,000.00	?
Accumulated Depreciation - Construction Equipment	?	$       2,000.00	?	?	?	$       2,000.00
Land	$     50,000.00	?	?	?	$     50,000.00	?
Building	$   112,000.00	?	?	?	$   112,000.00	?
Accumulated Depreciation -Building	?	$       2,500.00	?	?	?	$       2,500.00
Accounts Payable	?	$   200,000.00	?	?	?	$   200,000.00
Dividend Payable	?	$       5,000.00	?	?	?	$       5,000.00
Common Stock	?	$ 1,500,000.00	?	?	?	$ 1,619,800.00
Dividend	$       5,000.00	?	?	?	$       5,000.00	?
Sales	?	$   250,000.00	?	$ 250,000.00	?	?
Interest Revenue	?	$         750.00	?	$       750.00	?	?
Cost of jobs sold	$     87,450.00	?	$   87,450.00	?	?	?
Works Overhead	$         500.00	?	$       500.00	?	?	?
Salaries Expense	$     15,000.00	?	$   15,000.00	?	?	?
Depreciation Expense	$       2,500.00	?	$    2,500.00	?	?	?
Income Summary	?	?	$ 124,800.00	?	?	?
?	?	?	?	?	?	?
?	$ 1,977,250.00	$ 1,977,250.00	$ 250,750.00	$ 250,750.00	$ 1,851,300.00	$ 1,846,300.00

1. Prepare Financial Statements

Answer 1

1. ABC Company

Income Statement

For the month ended June 30, 2018

	$	$
Sales		250,000
Cost of Jobs Sold ( 87,450 + 500)		87,950
Gross Profit		162,050
Administrative Expenses
Salaries Expense	15,000
Depreciation Expense	2,500	17,500
Income from Operations		144,550
Other Income
Interest Revenue		750
Net Income		145,300

ABC Company

Statement of Retained Earnings

For the month ended June 30, 2018

Net Income for the period	$ 145,300
Less: Dividends declared	(5,000)
Balance, June 30 2018	$ 140,300

ABC Company

Balance Sheet

June 30 2018

Assets	$	$	Liabilities and Stockholders' Equity	$	$
Cash	1,040,500		Accounts Payable	200,000
Building Materials	190,500		Dividends Payable	5,000
Work in Process	116,050		Total Current Liabilities		205,000
Note Receivable	100,000		Stockholders' Equity
Interest Receivable	750		Common Stock	1,500,000
Total Current Assets		1,447,800	Retained Earnings	140,300
Property , Plant and Equipment			Total Stockholders' Equity		1,640,300
Construction Equipment, net	238,000
Buildings, net	109,500
Land	50,000	397,500
Total Assets		1,845,300	Total Liabilities and Stockholders' Equity		1,845,300