Question

Job Order Costing

The ABC Company builds residential housing. The company started operations on June 1^st, 2018. Below are transactions that occurred in the first month of operations (June 2018)

Journal Entries:

June 1) ABC Company sold common stock for $1,500,000 in cash. The company issued 15,000 shares of $100 Par stock.

June 2) ABC Company purchased $300,000 of building materials. Paying $100,000 cash and the rest on account due in 45 days. No credit terms were given.

June 3) ABC Company purchased construction equipment for $240,000 cash. The company uses the straight line method of depreciation. The equipment has a useful life of 9 years and a residual value of $24,000.

June 4) ABC Company started construction on 3 homes (Job 100, 101, 102) by requisitioning the following materials: The materials were delivered to the job sites.

Job Number	Direct Materials	Indirect Materials
100	$50,000	$2,000
101	$30,000	$1,000
102	$25,000	$1,500

June 14) The following direct labor was used and paid for during the period ($30/hour):

Job Number	Amount	Hours
100	$33,000	1100
101	$27,000	900
102	$22,500	750

Predetermined overhead rate calculated May 8, 2018

(Estimated Total Overhead Costs) / (Estimated Direct Labor Hours)

($24,000) / (3000 hours) = $7 per direct labor used

June 21) Job 100 is completed and ready for sale.

The following actual costs were incurred and paid (Except for depreciation transactions listed below) during the month of June:

June 2) Insurance on houses under construction $2,000 (covers up to any number of homes.

June 3) Insurance on anticipated completed homes $500 no matter the number.

June 8) Construction supervisor salary $6,000 (Paid Monthly)

June 8) Company president salary $8,000 (Paid Monthly)

June 8) Administrative staff salaries $3,000 (Paid Monthly)

June 12) Building Permits $3,000

June 15) Purchased land for $50,000 and a building for $112,000 to use as corporate HQ

June 20) Insurance on HQ is $1,000 per month

June 23) Declared a $5,000 cash dividend to be paid on July 23, 2018.

June 24) Job 100 is sold for $250,000; Cash $150,000 & $100,000 note receivable to be received on September 19, 2018. The amount received will be $109,000 principal and interest. The note is a 360 day (One year is 360 days) 9% simple interest note. An adjusting entry must be made for interest revenue earned for the month of June.

June 30) Depreciation for June on HQ Building $2,500

June 30) Depreciation on the construction equipment was _______________

June 30) Apply (Appropriate) overhead to incomplete jobs

June 30) Account for ending balance in Overhead account

Note: All June 30 entries are Adjusting Entries

1.Prepare a Statement of Retained Earnings

Answer 1

ABC COMPANY LIMITED
General journal for the month of june 2018
Date	Account Title	Debit	Credit
June.1	Cash	1500000
	Common Stock		1500000
	(Issue of 15,000 shares of $100 par stock)
June.2	Building material	300000
	Cash		100000
	Account Payable		200000
	(purchase of building material for cash and on account)
June.2	Works Overhead	2000
	Cash		2000
	(insurance premium paid)
June.3	Construction Equipment	240000
	Cash		240000
	(Purchase of construction equipment for cash)
June.3	Works Overhead	500
	Cash		500
	(insurance premium paid)
June.4	Work-in-process - Job#100	50000
	Work-in-process - Job#101	30000
	Work-in-process - Job#102	25000
	Works overhead	4500
	Building material		109500
	(Building material issued for construction)
June.8	Works Overhead	6000
	Cash		6000
	(Construction supervisor salary)
June.8	Saalries Expense	11000
	Cash		11000
	(President's and admn.staff salaries)
June.12	Works Overhead	3000
	Cash		3000
	(Building permit )
June.14	Work-in-process - Job#100	33000
	Work-in-process - Job#101	27000
	Work-in-process - Job#102	22500
	Cash		82500
	(Wages paid for direct labor)
June.15	Land	50000
	Building	112000
	Cash		162000
	(Purchase of land and building for office)
June.20	Insurance Expense	1000
	Cash		1000
	(Insurance premium on headquarter)
June.21	Work-in-process - Job#100	7700
	Works Overhead		7700
	(Overhead applied @$7 per direct labor hour to Job#100)
June.21	Completed Jobs	90700
	Work-in-process - Job#100		90700
	(Cost of job#100 transferred to completed jobs account)
June.23	Dividend	5000
	Dividend Payable		5000
	(Declaration of dividend )
June.24	Cash	150000
	Note Receivable	100000
	Sales		250000
	(Sale of Job#100 building)
	Cost of jobs sold	90700
	Completed Jobs		90700
	(Cost of job#100 sold transferred to cost of jobs sold)
June.30	Depreciation Expense	2500
	Accumulated Depreciation - HQ building		2500
	(Depreciation expense on HQ building recorded)
June.30	Depreciation Expense	24000
	Accumulated Depreciation - Construction Equipment		24000
	(Depreciation expense on construction equipment)
June.30	Work-in-process - Job101	6300
	Work-in-process - Job102	5250
	Works Overhead		11550
	(Overhead applied @$7 per direct labor hour for Jobs #101 and 102)
June.30	Works Overhead	3250
	Cost of jobs completed		3250
	(Overapplied overhead adjusted)
June.30	Interest Receivable	750
	Interest Revenue		750
	(Interest on note receivable @9% for June recorded)
	ABC COMPANY LIMITED
	Adjusted Trial Balance
	as at june 30, 2018
	Account	Debit	Credit
	Cash	1042000
	Building Material	190500
	Note Receivable	100000
	Interest Receivable	750
	Work-in-progress	116050
	Land	50000
	Construction Equipment	240000
	Accumulated Depreciation - Construction Equipment		24000
	Building	112000
	Accumulated Depreciation - Building		2500
	Accounts Payable		200000
	Dividend payable		5000
	Common Stock		1500000
	Dividend	5000
	Sales		250000
	Interest Revenue		750
	Cost of jobs sold	87450
	Salary Expense	11000
	Depreciation Expense	26500
	Insurance Expense	1000
	Total	1982250	1982250
Work
Date	Debit	Credit	Balance
June.2	2000		2000
June.3	500		2500
June.4	4500		7000
June.8	6000		13000
June.12	3000		16000
June.21		7700	8300
June.30		11550	-3250
Cash
Date	Debit	Credit	Balance
June.1	1500000		1500000
June.2		100000	1400000
June.2		2000	1398000
June.3		240000	1158000
June.3		500	1157500
June.8		6000	1151500
June.8		11000	1140500
June.12		3000	1137500
June.14		82500	1055000
June.15		162000	893000
June.20		1000	892000
June.24	150000		1042000