Question

Kim's Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possible. Special equipment is ordered as required. On May 1, the Materials and Equipment Inventory account had a balance of $40,000. The Work-in-Process Inventory account is maintained to record costs of work not yet complete. There were two such jobs on May 1 with the following costs.

	Job 27 Highlands Mall			Job 33 Pine Ridge Estates
Materials and equipment	$	15,975		$	52,900
Direct labor		13,900			26,450
Overhead (applied)		4,170			7,935

Overhead has been applied at 30 percent of the costs of direct labor.

During May, Kim's Asphalt started two new jobs. Additional work was carried out on Jobs 27 and 33, with the latter completed and billed to Pine Ridge Estates. Details on the costs incurred on jobs during May follow.

Job	27			33			34			35
Materials and equipment	$	3,400		$	5,200		$	5,000		$	3,300
Direct labor (wages payable)		4,900			7,150			6,300			2,000

Other May Events

1. Received $12,900 payment on Job 24 delivered to customer in April.
2. Purchased materials and equipment for $9,800 on account.
3. Billed Pine Ridge Estates $134,000 and received payment for $95,000 of that amount.
4. Determined that payroll for indirect labor personnel totaled $690.
5. Issued supplies and incidental materials for current jobs costing $195.
6. Recorded overhead and advertising costs for the operation as follows (all cash except equipment depreciation).

Property taxes	$	590
Storage area rental		715
Truck and delivery cost		360
Advertising and promotion campaign		640
Inspections		240
Telephone and other miscellaneous		365
Equipment depreciation		490

Required:

a. Prepare journal entries to record the flow of costs for operations during May.

b. Calculate the amount of over- or underapplied overhead for the month.

c. Determine inventory balances for Materials and Equipment Inventory and Work-in-process inventory.

Answer 1

Page Yourvo May 1. Trading Alo 4avo to opening stock e To wip (being bal. brought for card) Bank Mc, enthomer se To Iob 24) (Being amount received on sobre in April ) 12900 0900 dove 9800 Materials & Equipment se To Bante (Bring goodly purchased) Bank D Pine Ridge Estates To sales de (Bring sales booked & pastial amount received) 95 000 $9000 my 1340 PAL Alc 690 690 To salasy Ac (Being payroll for indirect labour B 195 Current Job Mc To Maksial Me for 195 (Being supplies issued cussant jols)

Date: Page no 640 360 1320 2910 490 490 340 490 590 Property Tax Ac D 590 Adverelizing expensy Ale M Transportation exp. Alc D Miscellaneous To Cash Me (Bung expenses paid) Depreciation Ac m To Equipment Me (Being depreciation charged) P&L AC To Depreciation Me To Property Tax To Addriftsing exp. Ale To Transportation Me & Mijo exp ( being exp. transferred to PAL AC) Job 27 se/ Highlands Mall of B 340 45 To Materials Mc To Direct wagy do To overhead sc (Being exp. for Tob 24 booked) O 87285 Job 33 Pine Ridge Estates Ale To Materials To direct wagy To overhead exp. 640 360 1320 Mays. 15975 13900 4170 52900 26.450 1935 (Bring exp. for Iob 33 booked)

Date: Page no (b) overhead Previously on sols :- $12105 Jolyt Job 33 $4170 $ 79 35 Total 3- m M expenses May on previous & new New Overhead ex jols respectively /H (outhead) 0.3 x Haco Jol 33 0.3 X 7150 Job 34 0.3X 6300 Job 35 0.3x 2000 Job 27 30% of Direct Labour . $ 1450 $ 2145 $ 1890 $ 600 Total $ 6105 They 1 under applied off is = $(12105-6105 = 1$ Gevo Inventory Balance opening inventory. utilisedt purchased & closing eventory (3400 + 5200t 5000 + 3300 $32900 YouD+ 9800