Question

Ladora Construction Company began operations on January 1, 2019, when it acquired $30,000 cash from the issuance of common stock. During the year, Ladora purchased $6,000 of direct raw materials and used $5,640 of the direct materials. There were 108 hours of direct labor worked at an average rate of $20 per hour paid in cash. The predetermined overhead rate was $9 per direct labor hour. The company started construction on three prefabricated buildings. The job cost sheets reflected the following allocations of costs to each building:

Direct Materials Direct Labor Hours

Job 1 1440 30

Job 2 2400 50

Job 3 1800 28

The company paid $320 cash for indirect labor costs. Actual overhead cost paid in cash other than indirect labor was $640. Ladora completed Jobs 1 and 2 and sold Job 1 for $5,000 cash. The company incurred $600 of selling and administrative expenses that were paid in cash. Over- or underapplied overhead is closed to Cost of Goods Sold.

Required

A) Record T-accounts.

B) Reconcile all subsidiary accounts with their respective control accounts.

C) Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.

D) Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2019.

Answer 1

Cash
To Capital	30,000	By Direct Materials	6,000
To Sales	5,000	By Direct Labor	2,160
		By Overheads	960
		By Selling and Administrative expenses	600
		By Balance c/d	25,280
	35,000		35,000
Direct Materials
To Cash	6,000	By Job 1	1,440
		By Job 2	2,400
		By Job 3	1,800
		By Inventory - Raw materials	360
	6,000		6,000
			360
Direct Labor
To Cash	2,160	By Job 1	600
		By Job 2	1,000
		By Job 3	560
	2,160		2,160
Overheads
To Cash	320	By Job 1	270
To Cash	640	By Job 2	450
To COGS	12	By Job 3	252
	972		972
Job 1
To Direct materials	1,440	By COGS	2,310
To Direct Labor	600
To Overheads	270
	2,310		2,310
Job 2
To Direct materials	2,400	By Inventory - Finished goods	3,850
To Direct Labor	1,000
To Overheads	450
	3,850		3,850
Job 3
To Direct materials	1,800	By Inventory - WIP	2,612
To Direct Labor	560
To Overheads	252
	2,612		2,612
Cost of goods sold
To Job 1	2,310	By Overheads	12
		By Profit and loss	2,298
	2,310		2,310

Closing entry for over applied overheads:

Overhead expenses account Dr 12

To COGS 12

Ladora Construction Co,
Schedule Cost of goods maufacture and sold
For the year ending December 31, 2019
Direct Materials
Purchased during the year	6,000
Less: Ending inventory	360
Raw materials transferred to production		5,640
Direct Labor		2,160
Overheads
Indirect Labor	320
Other overheads	640
Total overheads		960
Total Maufacturing costs		8,760
Add: Beginning WIP		-
Less: Ending WIP		2,612
Cost of goods Maufactured		6,148
Add: Beginning Finished goods		-
Less: Ending Finished goods		3,850
Cost of goods Sold		2,298

Ladora Construction Co,
Income statement
For the year ending December 31, 2019
Sales		5,000
Less: Cost of goods sold		2,298
Gross Profit		2,702
Selling and Administrative expenses		600
Net Profit		2,102
Ladora Construction Co,
Balance Sheet
As of December 31, 2019
Assets
Cash		25,280
Inventory
Raw materials	360
WIP	2,612
Finished goods	3,850
Inventory		6,822
Total Assets		32,102
Liabilities and Equity
Capital		30,000
Retained earnings		2,102
Total Liabilities and Equity		32,102