Factory overhead is applied to each job based on 125% of direct labor cost for that job. Hydro Paddle Boards, Inc. maintains only one factory overhead account. Remember that debits to Factory Overhead represent actual overhead and credits to Factory Overhead represent applied overhead. Since the difference between actual factory overhead and applied factory overhead is insignificant, the over applied or under-applied balance is closed out to Cost of Goods Sold as an adjusting entry at the end of each month.

Hydro Paddle Boards, Inc. marks up all work by 40% of the job cost. Refer to the individual Job Cost Record for the total cost of the job and multiply the total cost by 140% to determine the selling price for each job.

Since Hydro Paddle Boards, Inc. sells to dealers, sales are exempt from state sales tax. All sales are on account and are subject to terms of 1/10, net 30 days, FOB shipping point.

Accounts Payable is used solely for the purchase of direct materials and indirect materials and factory supplies. All vendors expect full payment within 30 days. Operating expenses, with the exception of any accrued salaries, payroll taxes, property taxes, and income taxes, are paid when incurred.

All cash received is deposited in the bank, and all payments are made by check.

17 Signed a contract with Extreme Board Systems for the manufacture of 77 units R1 (Racing 1) custom stand-up paddle (SUP) boards. The promise date is February 15. The company began the job today, applying $8,440.000 of direct materials to Job No. 1407. (Materials Requisition No. 1685)

17 Paid the sales manager of Hydro Paddle Boards, Inc. $285.24 for customer entertaining.

18 Received a report from the treasurer that Blue Runner Sports Dealers, one of our customers, has declared bankruptcy. Wrote off the balance owed to Hydro Paddle Boards, Inc. by Blue Runner Sports Dealers.

18 Sold and shipped Job No. 1405 to the appropriate customer. Refer to that jobs Cost Record for the total cost of the job to determine the selling price. The customer is not expected to pay within the discount period.

22 Purchased $20,464.32 of direct materials from K.C. Epoxy Supply Company, credit terms net 30 days.

22 Accepted a job for the manufacture of 28 units R2 (Racing 2) custom stand-up paddle (SUP) boards for Four Oceanic Designers. The promise date is January 31. The company began the job today, applying $4,936.20 of direct materials to Job No. 1408. (Materials Requisition No. 1686)

Jan. 24 Paid GT Matrix Corporation the amount due today from the January 9 purchase.

25 Applied $3,320.00 of direct labor to Job No. 1402, which will complete the job. (Time Ticket No. 262)

Applied factory overhead using the appropriate rate. Transferred the completed job to the finished goods account.

26 Sold and shipped Job No. 1402 to the appropriate customer. Refer to that jobs Cost Record for the total cost of the job to determine the selling price. Record the sale net of the 1% discount.

26 Applied $7,280.00 of direct labor to Job No. 1408, which will complete the job. (Time Ticket No. 264)Applied factory overhead using the appropriate rate. Transferred the completed job to the finished goods account.

29 Sold and shipped Job No. 1408 to the appropriate customer. Refer to the Job Cost Record for the total cost of the job for billing purposes. Record the sale net of the 1% discount.

31 Applied $2,000.00 of direct labor to Job No. 1404. (Time Ticket No. 266)

Applied factory overhead using the appropriate rate. This job will not be completed until February.

31 Applied $8,440.00 of direct labor to Job No. 1407. (Time Ticket No. 268)

Applied factory overhead using the appropriate rate. This job will not be completed until March.

Jan. 31 Applied $2,320.00 of direct labor to Job No. 1406. (Time Ticket No. 270)

Jan. 31 Paid all employees for wages earned in January.

Applied factory overhead using the appropriate rate. This job will not be completed until February.

31 Received the following data on the monthly payroll from the payroll clerk:

Direct labor (already recorded) .. $46,034.00 New payroll data (to be recorded):

Factory:

Indirect.................................... $22,440.00

Superintendents salary........... 6,200.00

Nonfactory:

Sales salaries........................... 23,950.00

Officers salaries..................... 14,280.00

Office salaries......................... 12,620.25

Record the monthly payroll in the general journal. Remember that direct labor payroll already has been recorded as it was incurred in January. Salaries for indirect labor are recorded only at the end of the month. Debit Factory Overhead for indirect labor and superintendents salaries, debit other salary expense accounts for the appropriate amounts, credit FICA Tax Payable for 8% of gross pay, credit Employees Income Tax Payable for 15% of gross pay, and credit Salaries Payable for the net pay.

31 Record the employer payroll taxes for January. All payroll taxes related to factory personnel are debited to Factory Overhead; all payroll taxes related to nonfactory personnel are debited to Payroll Taxes ExpenseGeneral. Use a simplified FICA tax rate of 8% of gross pay, a state unemployment tax rate of 5.4%, and a federal unemployment tax rate of 0.8%. Since this is the first month in the current year, no employee has reached the ceilings on the payroll taxes.

31 Received a check from SaltWaterHut.com for the amount due.

31 Received a check from Fiji Stand-Up Paddle Board Co. for the amount due.

31 Purchased $16,428.00 of direct materials on account from Light Hardware, Inc.

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