Koch Construction Company began operations on January 1, 2015, when it acquired
ID: 2451092 • Letter: K
Question
Koch Construction Company began operations on January 1, 2015, when it acquired $12,000 cash from the issuance of common stock. During the year, Koch purchased $2,600 of direct raw materials and used $2,400 of the direct materials. There were 112 hours of direct labor worked at an average rate of $6 per hour paid in cash. The predetermined overhead rate was $3.00 per direct labor hour. The company started construction on three prefabricated buildings. The job cost sheets reflected the following allocations of costs to each building.
Job 1: Direct materials $ 600; direct labor 28 hours
Job 2 Direct materials 1,000; direct labor 52 hours
Job 3: Direct materials 800; direct labor 32 hours
The company paid $62 cash for indirect labor costs. Actual overhead cost paid in cash other than indirect labor was $260. Koch completed Jobs 1 and 2 and sold Job 1 for $1,452 cash. The company incurred $130 of selling and administrative expenses that were paid in cash. Over- or underapplied overhead is closed to Cost of Goods Sold.
Required: Record the preceding events and the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model. Reconcile all subsidiary accounts with their respective control accounts. (Enter costs of each job individually. Enter any decreases to account balances with a minus sign.)
Explanation / Answer
Journal Entries:
Calculation of Overhead Overapplied: Direct Labor Hours = 112
Rate = $3 Per Hour
Overhead Applied = 112 x 3 = 336
Actual Overhead = 62 + 260 = $322
Overhead Overapplied = $14
Date Account Title Debit Credit xxx Cash 12,000 Common Stock 12,000 xxx Inventory 2,600 Cash 2,600 xxx Work in Process 2,400 Raw Material Inventory 2,400 xxx Work in Process 1,008 Factory Payroll 672 Factory Overhead 336 xxx Finished Goods Inventory 3,408 Work In Process 3,408 xxx Account Receivable 1,452 Cost of Goods sold 852 Sales 1,452 Finished Goods Inventory 852 xxx Factory Overhead 14 Cost of Goods sold 14Related Questions
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