Question

"17-30A Accounting for transactions, construction company Superior Construction, Inc. is a home builder in Arizona, Superior uses a job order costing system in which each house is a job. Because it constructs houses, the com pany uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction over. head of $1,150,000 and total direct labor costs of $5,750,000. The following events occurred during August: a. Purchased materials on account, $400,000 b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned. House 402 House 403 House 404 House 405 Direct Materials $ 58,000 62,000 61,000 86,000 Direct Labor $44,000 32,000 58,000 57,000 c. The company incurred total wages of $300,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,700. e. Other overhead costs incurred: Equipment rentals paid in cash, $30,000; Worker liability insurance expired, $7,000. f. Allocated overhead to jobs. g. Houses completed: 402, 404. h. House sold on account: 404 for $250,000. Requirements 1. Calculate Superior's predetermined overhead allocation rate for the year. 2. Prepare journal entries to record the events in the general journal. 3. Open T-accounts for Work-in-Process Inventory and Finished Goods Inventory Post the appropriate entries to these accounts, identifying each entry by letter. Determine the ending account balances, assuming that the beginning balances were zero.

Answer 1

Ques 1
overhead rate = total cost / total estimated quantity
overhead rate =	(1150000/5750000)
overhead rate =	20%

Ques 2

Date	Accounts and Explanation	Debit	Credit
Aug. 31
a.	Raw Materials Inventory	400,000
	Accounts Payable		400,000
b.	Work-in-Process Inventory	267,000
	Raw Materials Inventory		267,000
c.	Work-in-Process Inventory	191,000
	Construction Overhead	109,000
	Wages Payable		300,000
d.	Construction Overhead	6,700
	Accumulation Depreciation—Equipment		6,700
e.	Construction Overhead	37,000
	Cash		30,000
	Prepaid Insurance		7,000
	(13000+37000+3000)
f.	Work-in-Process Inventory	38,200
	Construction Overhead		38,200
g.	Finished Goods Inventory	241,400
	Work-in-Process Inventory		265,000
	58000+44000+44000*0.2+61000+58000+58000*0.2
h.	Accounts Receivable	250,000
	Sales Revenue		250,000
	Cost of Goods Sold	130,600
	Finished Goods Inventory		130,600
	61000+58000+58000*0.2

Ques 3

Work In Process Inventory
b	267,000	g	265,000
c	191,000
f	38,200
Balance	231,200
Finished Goods inventory
g	265,000	h	130,600
Balance	134,400