Question

I Accounting for a Service Company The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July: July 3. Charged 640 hours of professional (lawyer) time to the Obsidian Co. breech of contract suit to prepare for the trial, at a rate of $230 per 10. Reimbursed travel costs to employees for depositions related to the Obsidian case. $24,200. 14. Charged 180 hours of professional time for the Obsidian trial at a rate of $260 per hour. 18. Received invoice from consultants Wadsley and Harden for $52,700 for expert testimony related to the Obsidian trial 27. Applied office overhead at a rate of $50 per professional hour charged to the Obsidian case 31. Paid administrative and support salaries of $29,100 for the month. 31. Used office supplies for the month, $9,800. 31. Paid professional salaries of $161,800 for the month. 31. Billed Obsidian $356,300 for successful defense of the case.

Answer 1

Job order cost accounting for a service company

Jul. 3 Work in Process          dr $14,7200
                 Salaries Payable     $ 14,7200
Jul. 10 Work in Process        dr $24,200
                 Cash                        $24,200
Jul. 14   Work in Process         dr $46,800
                   Salaries payable           $ 46,800
July 18    Work in Process         dr $52,700
                    Consultant fees payable $52,700
Jul. 27    Work in Process         dr $41,000
                    Office overhead            $41,000
Jul. 31   Office overhead        dr    $29,100
                    Cash                            $ 29,100
Jul. 31   Office overhead          dr $9,800
                    Supplies                          $9,800
Jul. 31    Salaries payable         dr $16,1800
                    Cash                              $16,1800
July 31 accounts receivable          dr    $35,6300
                      Fees earned                       $35,6300
July 31   cost of service          dr $3, 11,900
                   Work in process $3,11,900       

b. How much office overhead is over- or under applied?
21,700       Under applied
c. Determine the gross profit on the Obsidian case, assuming that over- or under applied office overhead is closed monthly to cost of services.
$30,040