Determine and record job costs (Learning Objectives 2, 3, 4, 5)

Aloha Construction is a home builder in Hawaii. Aloha uses a perpetual inventory system and a job cost 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, $480,400.

b. Incurred construction wages of $219,800. Requisitioned direct materials and used direct labor in construction as follows:

c.Depreciation of construction equipment, $6,400.

d.Other construction overhead costs incurred on Houses 302 through 305:

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

f. Houses completed: 302 and 304.
g. House sold on account: 304 for $189,500.
Requirements 1. Record the events in the general journal.
2. Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these accounts, identifying each entry by letter. Determine the ending account balances assuming that the beginning balances were zero.
3. Summarize the job costs of the unfinished houses and show that this total amount equals the ending balance in the Work in Process Inventory account.
4. Summarize the job cost of the completed house that has not yet been sold and show that this equals the ending balance in Finished Goods Inventory.
5. Compute gross profit on the house that was sold. What costs must gross profit cover for Aloha Construction?

Transcribed Image Text:

Direct Materials Direct Labor House 302........ $58,400 $42,300 House 303 69,000 32,800 House 304. 67,600 50,400 House 305............. 84,200 52,700