The law firm of Clark and Lankau accumulates costs associated with individual ca

Question

The law firm of Clark and Lankau accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during May: May 2. Charged 200 hours of profesional (lawyer) time to the peterson co. breech of conteact suit to prepare for the trial, at a rate of $140 per hour. May 7. Reimbursed travel costs to employees for depositions related to the Peterson Case, $14,600 May 11. Charged 300 hours of professional time for the Peterson trial at a rate of $175 per hour. May 16. Received invoice from consultants Davis and Haris for $40,000 for expert testimony related to the Peterson trial. May 21. Applied office overead at a rate of $50 per professional hour charged to the Peterson case. May 31. Paid secretrial and administrative salaris of $26,000 for the month. May 31. Used office supplies for the month, $6000 May 31. Paid professional salaries of $38,640 for the month. May 31. Billed Peterson $185,000 for successful defense of the case a. Provide the journal entries for each of the above transactions. b. How much office overhead is over- or underapplied? Enter your answer as a positive number. c. Determine the gross profit on the Peterson case, assuming that over- or underapplied office overhead is closed monthly to cost of services.

Explanation / Answer

a Journal Enrty May Date Account Title Dr $ Cr $ May 2. Petereson Co -Job Order          28,000 Professional Salary Payable      28,000 (professional salalry charged to job/200 hrs@ 140) May 7. Cash      14,600 Travel Expenses          14,600 (Travel expense reimbersed) Travel Expenses      14,600 Petereson Co -Job Order          14,600 (travel expense charged to job) May 11. Petereson Co -Job Order          52,500 Professional Salary Payable      52,500 (professional salalry charged to job/300 hrs@ 175) May 16. Consultancy Service Expense          40,000 Accounts Payable      40,000 (testimony bill from David & Harris) Petereson Co -Job Order          40,000 Consultancy Service Expense      40,000 (consultance service expense charged to job) May 21. Petereson Co -Job Order          25,000 Overhead Control A/C      25,000 (Office OH applied@50/hr for 500 hrs) May 31. Cash      26,000 Secretarial & Admin Salary Expense          26,000 Office Supplies         6,000 Office Supplies Expense            6,000 Secretarial & Admin Salary Expense      26,000 Office Supplies Expense         6,000 Overhead Control A/C          32,000 (transfer of overhead expenses to OH a/c) Professional Salary Payable          38,640 Cash      38,640 Accounts Receivable       185,000 Service Revenue    185,000 b Office Overhead Incurred          32,000 Office OH Applied          25,000 Office Overhead underapplied            7,000 c Gross Profit Peterson case Amt 4 Service Revenue       185,000 Less Cost of Services Professional salaries          80,500 Travel Expenses          14,600 Consultancy Service Expense          40,000 Office Overhead applied          25,000 Office Overhead underapplied            7,000 Total cost of service       167,100 Gross Profit Peterson case          17,900

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