Question

Problem 7-53 Show Flow of Costs to Jobs
Problem 7-53 Show Flow of Costs to Jobs (LO 7-2, 3) Kim's Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possible. Special equipment is ordered as required. On May 1, the Materials and Equipment Inventory account had a balance of $46,000. The Work-in-Process Inventory account is maintained to record costs of work not yet complete. There were two such jobs on May 1 with the following costs: Materials and equipment Direct labor Overhead (applied) Job 27 Highlands Mall $16,875 14,500 4,350 Job 33 Pine Ridge Estates $ 53,500 26,750 8,025 Overhead has been applied at 30 percent of the costs of direct labor. During May, Kim's Asphalt started two new jobs. Additional work was carried out on Jobs 27 and 33, with the latter completed and billed to Pine Ridge Estates. Details on the costs incurred on jobs during May follow: Job Materials and equipment Direct labor (wages payable) 27 $4,000 5,500 33 $5,800 7.750 34 $5,600 6,900 35 $3,900 2,600 Other May Events 1. Received $13,500 payment on Job 24 delivered to customer in April. 2. Purchased materials and equipment for $10,400 on account. 3. Billed Pine Ridge Estates $140,000 and received payment for $125,000 of that amount. 4. Determined that payroll for indirect labor personnel totaled $750. 5. Issued supplies and incidental materials for current jobs costing $255. 6. Recorded overhead and advertising costs for the operation as follows (all cash except equipment depreciation): Property taxes Storage area rental Truck and delivery cost Advertising and promotion campaign Inspections Telephone and other miscellaneous Equipment depreciation $650 775 420 700 300 425 550 Required: a. Prepare journal entries to record the flow of costs for operations during May (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

I am having a hard time figuring out the 8th and 9th journal entry. Please show work :)

Answer 1

a. In the books of Kim's Asphalt:

Transaction	General Journal	Debit	Credit
		$	$
8.	Work in Process Inventory	48,875
	Materials and Equipment Inventory		19,300
	Wages Payable		22,750
	Overhead		6,825
	To record charges to work in process
9.	Cost of Installations Completed and Sold	104,150
	Work in Process Inventory: Materials and Equipment		59,300
	Work in Process: Direct Labor		34,500
	Work in Process: Overhead		10,350
	To record completion of Job 33

Total cost assigned to Job 33 :

Beginning Work in Process	$ 88,275
Costs incurred during May
Materials and Equipment	5,800
Direct Labor	7,750
Overhead Applied	2,325
Total Cost of Job 33	$ 104,150

b. Overapplied : $ 3,120

Actual overhead costs :$ 3,705

Overhead applied : $ 6,825

Overapplied = $ 6,825 - $ 3,705 = $ 3,120

Indirect materials	$ 255
Indirect labor	750
Property Taxes	650
Rental expense	775
Inspections	300
Telephone and other miscellaneous	425
Equipment depreciation	550
Total Manufacturing Overhead Incurred	$ 3,705

Note: Truck and delivery expense, and advertising and promotion expense are selling expenses, and as such, not to be included in product cost.

c.

Materials and equipment inventory	$ 36,845
Work in Process Inventory	$ 68,725