Question

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 $45,000. 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 Job 33 Highlands Mall Pine Ridge Estates $16,725 $53,400 14,400 26,700 5,760 10,680 Overhead has been applied at 40 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 27 33 34 35 Materials and equipment $3,900 $5,700 $5,500 $3,800 Direct labor (wages payable) 5,400 7,650 2,500 6,800 Other May Events 1. Received $13,400 payment on Job 24 delivered to customer in April. 2. Purchased materials and equipment for $10,300 on account. 3. Billed Pine Ridge Estates $139,000 and received payment for $120,000 of that amount. 4. Determined that payroll for indirect labor personnel totaled $740. 5. Issued supplies and incidental materials for current jobs costing $245. 6. Recorded overhead and advertising costs for the operation as follows (all cash except equipment depreciation). Property taxes $640

Answer 1

Answer:

a

	General Journal	Debit	Credit
1	Cash	$13400
	Accounts receivable		$13400
2	Material and equipment inventory	$10300
	Accounts payable		$10300
3	Accounts receivable	$139000
	Sales revenue		$139000
	Cash	$120000
	Accounts receivable		$120000
4	Manufacturing overhead	$740
	Wages payable		$740
5	Manufacturing overhead	$245
	Material and equipment inventory		$245
6	Manufacturing overhead ($640+765+410+290+415+540)	$3060
	Selling and administrative cost-(Advertising)	690
	Cash ($3060+690-540)		$3210
	Accumulated depreciation		540

b.

Actual overhead = $740 (indirect labor)+245 (indirect material)+3060 (other manufacturing overhead) = $4045

Applied overhead = $22350 (Total direct labor cost for May)*40% = $8940

Over applied overhead = $4895

c

Material and equipment inventory = $45000 (Beginning balance)+10300 (Purchases)-18900 (Direct material issued)-245 (Indirect material)

Material and equipment inventory = $36155

Work in process inventory = $127665 (Job 27+Job 33)+18900 (Direct material issued)+22350 (Direct labor cost)+8940 (Applied overhead)-99180 (Cost of Job 33 completed ) = $78675

Working Note:

Cost of Job 33 completed = $90780 ( Beginning balance)+8400 (5700+7650+7650*40%) = $99180