Question

1.       The Haskins Crew Co. provides advertising services for clients across the nations. The Haskins Crew Co. is presently working on four projects, each for a different client. The Haskins Crew accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs.    The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchase.The predetermined Overhead is 60% of media purchases.

   September 1, the four advertising projects had the following accumulated costs:

                       

                                                                                               Sept 1 Balance

                                    SBH Auto Group                                  $120,000

                                    Feel Good Chairs, Inc                               36,000

                                    Bounce-A-Lot Trampolines                       84,000

                                    Hyped up Beverages                                   1,000

                                    Total                                                   $241,000

During September, the Haskins Crew incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:

                                                                                               Direct Labor                     Media Purchases

                                    SBH Auto Group                                  $84,000                                    $315,000

                                    Feel Good Chairs, Inc                           37,500                                    277,500

                                    Bounce-A-Lot Trampolines                   165,000                                    202,500

                                    Hyped up Beverages                             187,500                                    151,500

                                                                                               $474,000                                    $946,500

end At the end of September, both the SBH Auto Group & the Bounce-A-Lot Trampolines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.

a.       Prepare the journal entries for the following

a.       Direct labor costs

b.       Media purchases

c.       Overhead applied

d.       Completion of SBH Auto Group & the Bounce-A-Lot Trampolines campaigns

b.       Prepare a schedule of unfinished jobs to support the balance in the work in process account.

Answer 1

a.

Transaction	Account Titles and Explanation	Debit	Credit
a.	Work in process	474000
	Salaries payable		474000
	(To record direct labor costs incurred)
b.	Work in process	946500
	Accounts payable		946500
	(To record media purchase costs incurred)
c.	Work in process (60% x $946500)	567900
	Overheads		567900
	(To record overhead applied)
d.	Cost of services ($708000 + $573000)	1281000
	Work in process		1281000
	(To reocrd completion of projects)

b.

Schedule of Unfinished Jobs
Feel Good Chairs, Inc.	517500
Hyped up Beverages	430900
Balance in work in process $	948400

Working:

	Projects
	SBH Auto Group	Feel Good Chairs, Inc.	Bounce-A-Lot Trampolines	Hyped up Beverages
Beginning balance	120000	36000	84000	1000
Direct labor	84000	37500	165000	187500
Media purchases	315000	277500	202500	151500
Overheads	189000	166500	121500	90900
Total cost $	708000	517500	573000	430900