Please somebody can help with the steps of this problem: Thank you
(Comprehensive) Construction Company uses a job order costing system. In May 2008, company made a $1,650,000 bid to build a pedestrian overpass over the beach highway in Gulfport, Mississippi. Company Construction won the bid and assigned #515 to the project. Its completion date was set at December 15, 2008. The following costs were estimated for completion of the overpass: $620,000 for direct material, $335,000 for direct labor, and $201,000 for overhead.
During July, direct material cost assigned to Job #515 was $60,900, and direct labor cost associated with it was $87,520/ The firm uses a predetermined OH rate of 60 percent of direct labor cost. Company Construction also worked on several other jobs during July and incurred the following costs:
Direct material (including job #515) $289,650
Direct labor (including job #515) 292,000
Indirect labor 27,900
Administrative salaries and wages 19,800
Depreciation on construction equipment 13,200
Depreciation on office equipment 3,900
Client entertainment (on accounts payable) 5,550
Advertising for firm (paid in cash) 3,300
Indirect material (from supplies inventory) 9,300
Miscellaneous expenses (design related;
to be paid in the following month) 5,100
Accrued utilities (for office, $900; for construction, 3,600
$2,700)
During July, Company Construction completed several jobs that had been in process before the beginning of the month. These completed jobs generated $612,000 of revenues for the company. The related job cost sheets showed costs associated with those jobs of $414,500. At the beginning of July, Company Construction had Work in Process Inventory of $435,900.
a. Prepare a job order cost sheet for Job #515, including all job details, and post the appropriate cost information for July.
b. Prepare journal entries for the preceding information.
c. Prepare a Cost of Goods Manufactured Schedule for July for Company Construction Company.
d. Assuming that the company pays income tax at a 40 percent rate, prepare an income statement for Company Construction Company.
a. To prepare a job order cost sheet for Job #515, we need to list all the job details and post the appropriate cost information for July.
1. Start by creating a table with the following columns:
- Job #515
- Direct Material
- Direct Labor
- Overhead
- Total Cost
2. Under the "Direct Material" column, enter the estimated direct material cost of $620,000.
3. Under the "Direct Labor" column, enter the estimated direct labor cost of $335,000.
4. Calculate the overhead by multiplying the actual direct labor cost ($87,520) by the predetermined overhead rate (60%). Enter the result ($52,512) in the "Overhead" column.
5. Add up the costs for direct material, direct labor, and overhead to get the total cost for Job #515. In this case, the total cost is $620,000 + $335,000 + $52,512 = $1,007,512.
6. Post the actual costs for July in the corresponding columns. For direct material, enter $60,900. For direct labor, enter $87,520. For overhead, enter $52,512.
b. To prepare journal entries for the preceding information, we need to record the transactions that occurred during July.
1. Direct material cost:
- Debit Direct Material (Including Job #515) account for $289,650
- Credit Accounts Payable for $289,650
2. Direct labor cost:
- Debit Direct Labor (Including Job #515) account for $292,000
- Credit Accounts Payable for $292,000
3. Indirect labor:
- Debit Indirect Labor account for $27,900
- Credit Accounts Payable for $27,900
4. Administrative salaries and wages:
- Debit Administrative Salaries and Wages account for $19,800
- Credit Accounts Payable for $19,800
5. Depreciation on construction equipment:
- Debit Depreciation Expense (Construction Equipment) account for $13,200
- Credit Accumulated Depreciation (Construction Equipment) account for $13,200
6. Depreciation on office equipment:
- Debit Depreciation Expense (Office Equipment) account for $3,900
- Credit Accumulated Depreciation (Office Equipment) account for $3,900
7. Client entertainment:
- Debit Miscellaneous Expenses account for $5,550
- Credit Accounts Payable for $5,550
8. Advertising for the firm:
- Debit Advertising Expense account for $3,300
- Credit Cash for $3,300
9. Indirect material:
- Debit Indirect Material (from supplies inventory) account for $9,300
- Credit Accounts Payable for $9,300
10. Miscellaneous expenses:
- Debit Miscellaneous Expenses account for $5,100
- Credit Accounts Payable for $5,100
11. Accrued utilities:
- Debit Utilities Expense (Office) account for $900
- Debit Utilities Expense (Construction) account for $3,600
- Credit Utilities Payable for $2,700
c. To prepare a Cost of Goods Manufactured Schedule for July, we need to calculate the various costs incurred during the month.
1. Start with the beginning Work in Process Inventory of $435,900.
2. Add the direct material cost assigned to Job #515 ($60,900) and the direct labor cost associated with it ($87,520).
3. Calculate the total manufacturing costs by adding the direct material cost assigned to all jobs ($289,650) and the direct labor cost associated with all jobs ($292,000).
4. Calculate the total costs incurred by adding the total manufacturing costs with the indirect labor, administrative salaries and wages, depreciation on construction equipment, depreciation on office equipment, client entertainment, advertising, indirect material, and miscellaneous expenses.
5. Subtract the beginning Work in Process Inventory from the total costs incurred to get the Cost of Goods Manufactured.
d. To prepare an income statement for Company Construction Company, we need to calculate all the revenues and expenses and determine the net income.
1. Start with the total revenues generated by the completed jobs during July ($612,000).
2. Subtract the cost of those completed jobs ($414,500) to get the gross profit.
3. Sum up all the expenses incurred during July, including the direct material, direct labor, indirect labor, administrative salaries and wages, depreciation on construction equipment, depreciation on office equipment, client entertainment, advertising, indirect material, miscellaneous expenses, and income tax expense.
4. Subtract the total expenses from the gross profit to calculate the net income.
By following these steps, you should be able to prepare the job order cost sheet, journal entries, Cost of Goods Manufactured Schedule, and income statement for Company Construction Company.