The law firm of Furlan and Benson accumulates costs associated with individual c

Question

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: Charged 175 hours of professional (lawyer) time at a rate of $150 per hour to the Obsidian Co. breech of contract suit to prepare for the July 3. trial 10. Reimbursed travel costs to employees for depositions related to the Obsidian case, $12,500 14. Charged 260 hours of professional time for the Obsidian trial at a rate of $185 per hour. 18. Received invoice from consultants Wadsley and Harden for $30,000 for expert testimony related to the Obsidian trial 27. Applied office overhead at a rate of $62 per professional hour charged to the Obsidian case 31. Paid administrative and support salaries of $28,500 for the month. 31. Used office supplies for the month, $4,000. 31. Paid professional salaries of $74,350 for the month. 31. Billed Obsidian $172,500 for successful defense of the case. a. Provide the journal entries for each of these transactions. July 3 July 10 July 14 July 18 July 27 July 31 Admin. sal.

Explanation / Answer

(a) Date Account Titles and Explaination Debit Credit Jul-03 Work in process (175 hours X $150) $     26,250 Salaries Payable $     26,250 Jul-10 Work in process $       1,500 Cash $       1,500 Jul-14 Work in process (260 hours X $185) $     48,100 Salaries Payable $     48,100 Jul-18 Work in process $     30,000 Consultant fees payable $     30,000 Jul-27 Work in process [(175 hours + 260 hours) X $62] $     26,970 Office overhead $     26,970 (Being office overheads charged) Jul-31 Office overhead $     28,500 Cash $     28,500 Jul-31 Office overhead $       4,000 Supplies $       4,000 Jul-31 Salaries Payable $     74,350 Cash $     74,350 Jul-31 Accounts receivables $ 1,72,500 Fees earned $ 1,72,500 Jul-31 Cost of service ($26,250 + $12,500 + $48,100 + $30,000 + $26,970) $ 1,43,820 Work in process $ 1,43,820 (b) Computation of Overapplied or underapplied overheads: Actual Overheads incurred ($28,500 + $4,000) = $     32,500 Overheads Applied = $     26,970 Underapplied Overheads = $       5,530 (c) Computation of gross profit: Fees earned = $ 1,72,500 Cost of service ($1,43,820 + $5,530) = $ 1,49,350 Gross Profit = $     23,150

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