Sherborn Construction, Inc., is a home builder in New Mexico. Sherborn uses a jo

Question

Sherborn Construction, Inc., is a home builder in New Mexico. Sherborn uses a job order costing system in which each house is a job. Because it constructs houses, the company uses accounts titled Construction wages and Construction overhead. The following events occurred during August:

a. Purchased Materials on account $470,000

b. Incurred Contrstucion wages of $230,000.

C. Requisitioned direct materials and used direct labor in construction:

Direct Materials Direct Labor

House 402 $58,000 $40,000

House 403 $63,000 $34,000 $177,000

House 404 $60,000 $52,000 $221,000

House 405 $89,000 $51,000

D. Deprectaion of construction equipment $6,800

E. Other overhead costs incurred on houses 402 through 405.

Indirect Labor $44,000

Equipment rentals in cash $33,000

Worker liability insurance expired $7,000

F. Allocated overhead to jobs at the predetermined rate of 40% of direct labor cost

G. Houses completed 402 and 404

H. House 404 Sold for $220,000

A. Record the events in gerenal journal

Explanation / Answer

Answer:

Record the events in the general journal. Start with the entry from event (a). Journal Entry Date Accounts Debit Credit a. Raw material inventory A/C Dr.            470,000 To Accounts Payable A/C    470,000 Event (b) has two journal entries to record. First record the construction wages. Journal Entry Date Accounts Debit Credit b. Construction wages A/C            230,000 To Wages Payable A/C    230,000 Now record the requisitioned direct materials and direct labor used. Journal Entry Date Accounts Debit Credit b. Work in Process Inventory A/C            447,000 To Material inventory A/C    270,000 To Construction wages A/C    177,000 Next record the depreciation of construction equipment, $6,800. Journal Entry Date Accounts Debit Credit c. Construction overhead A/C Dr                 6,800 To Accumulated dep -Equipment A/C         6,800 Record the overhead costs incurred on houses 402 through 405. Journal Entry Date Accounts Debit Credit d. Construction overhead A/C Dr.              84,000 To construction wages A/C      44,000 To cash A/C      33,000 To Prepaid insurance A/C         7,000 Record the allocated overhead to jobs at the predetermined rate of 40% of direct labor cost. Journal Entry Date Accounts Debit Credit e. Work in process inventory A/C Dr.              70,800 To Construction overhead A/C      70,800 Record the completed houses 402 and 404 in event (f). Journal Entry Date Accounts Debit Credit f. Finished goods inventory A/C Dr.            246,800 To Work in process inventory A/C    246,800 Begin by recording the revenue from the sale of house 404. Journal Entry Date Accounts Debit Credit g. Accounts receivable A/C Dr.            220,000 To sales revenue A/C    220,000 Next record the cost of goods sold from the sale of house 404. Journal Entry Date Accounts Debit Credit g. Cost of goods sold A/C Dr.            132,800 To finished goods inventory A/C    132,800

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