Job-order cost system Stewart Construction Company began operations on January 1, 2007, when it acquired $6,000 cash from the issuance of common stock. During the year, Stewart purchased $2,600 of direct raw materials and used $2,400 of the direct materials. There were 108 hours of direct labor worked at an average rate of $4 per hour paid in cash. The predetermined overhead rate was $2.50 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.

The company paid $80 cash for indirect labor costs. Actual overhead cost paid in cash other than indirect labor was $210. Stewart completed Jobs 1 and 2 and sold Job 1 for $1,050 cash. The company incurred $100 of selling and administrative expenses that were paid in cash. Over- or underapplied overhead is closed to Cost of Goods Sold.
Required

a. Record the preceding events in a horizontal statements model. In the Cash Flow column, designate the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).
The first event for 2007 has been recorded as an example.
Job-Order, Process, and Hybrid Cost Systems 553 Cash  Raw M.  MOH  WIP  F. Goods C. Stk.  Ret. Ear.
6,000 NA NA NA NA 6,000 NA NA  NA NA 6,000 FA Assets Equity Rev. Exp. Net Inc. Cash Flow

b. Reconcile all subsidiary accounts with their respective control accounts.

c. Record the closing entry for over- or underapplied manufacturing overhead, assuming that the amount is insignificant. Close revenue and expense accounts.

d. Prepare a schedule of cost of goods manufactured and sold, an income statement, a balance sheet, and a statement of cash flows for 2007.