Accounting for transactions, construction company or Construction, Inc. is a hom

Question

Accounting for transactions, construction company or 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- ses an account titled Construction Overhead. The company applies over head on estimated direct labor costs. For the year, it estimated construction over- b 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. & Houses completed: 402, 404. h. House sold on account: 404 for $250,000. uirements Calculate Superior's predetermined overhead allocation rate for the year Prepare journal entries to record the events in the general journal. Open Taccounts for Work-in-Process Inventory and Finished Goods Inventory appropriate entries to these accounts, identifying each entry by letter. ctermine the ending account balances, assuming that the beginning balances were zero.

Explanation / Answer

Superior Construction, Inc Requirement 1 Calculation of predetermined overhead allocation rate for the year =Eastimated construction overhead/Total direct labor costs =1150000/5750000 0.2 per $ Requirement 2 Amount in $ Working Notes Date General Journals Debit Credit House 402 403 404 405 Material 58000 62000 61000 86000 a Raw Material Inventory 400000 Direct Labor 44000 32000 58000 57000 Accounts Payable 400000 Construction Overhead 8800 6400 11600 11400 Total cost 110800 100400 130600 154400 b Work in Process Inventory 267000 Status Completed WIP Completed & Sold WIP Raw Material Inventory 267000 c Work in Process Inventory 191000 Direct Labor 191000 Direct Labour 191000 Indirect Labor 109000 Wages Payable 300000 d Depreciation 6700 Accumulated Depreciation 6700 e Equipment rental 30000 Worker Insurance 7000 Cash 30000 Prepaid worker's Insurance 7000 Work In Process Inventory 38200 Construction Overhead 38200 g Finished goods Inventory 241400 Work In Process 241400 See Working Note h Account Receivable 250000 Revenue from Sales 250000 Cost of sales 130600 Finished goods Inventory 130600 Requirement 3 Work in Process Inventory Raw Material Inventory 267000 Finished goods Inventory 241400 Direct Labor 191000 Construction Overhead 38200 Ending Balance 254800 Finished goods Inventory Work In process Inventory 241400 Cost of sales 130600 Ending Balance 110800 241400 241400 Requirement 4 Reconciliation of Work in Process subsidiary and control Account Total Total WIP Balance House 403 House 405 254800 Unfinished Houses Material 62000 86000 Direct Labor 32000 57000 Overhead 6400 11400 Total cost ending WIP Inventory 100400 154400 254800 Requirement 5 Reconcilation of Finished goods subsidiary and controll Accounts House 402 Completed unsold houses Material 58000 Direct Labor 44000 Overhead 8800 Total cost equals ending Finished goods Inventory 110800 Requirement 6 Computation of gross profit House 404 Sales amount 250000 Less : Cost of sales 130600 Gross Profit 119400 Following types of cost the gross profit must cover Construction Wages Direct Labor Direct Material Construction Overhead Thank You

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