Howie Star Company manufactures men clothing. It uses a job costing system that allocates factory overhead on the basis of direct labor- hours. Budgeted factory overhead for the year 2018 was $1,320,000, and management budgeted 88,000 direct labor- hours.The company's tax is 21 % (Round income tax to the nearest dollar).Below is Howie Star trial balance at the beginning of September 2018.

DebitCredit

Cash...............................................$24,600

Accounts Receivable............................18,070

Materials Control ...............................14,400

Work in process Control.........................4,300

Finished Goods Control........................8,900

Prepaid factory insurance........................... 3,600

Machinery and Equipment.....................40,000

Accumulated depreciation.....................$15,370

Accounts payable...............................8,000

Capital stock.....................................71,500

Retained earnings...............................19,000

Total$113,870$113,870

The following transactions are for September 2018:

Sept 1.Purchased 5,000 yards of materials on account at $10 per yard

2.Paid factory utility bill, $5,230 in cash.

3.Borrowed $120,000 from XYZ Bank on a note payable.

5.Purchased on account 50 spools of thread at $8 per spool(indirect material).

7.Requisitioned 3,500 yards of materials and 10 spools of thread for production.

20.Record a bill for restructuring cost for $3,500. This amount has not yet been paid.

25.Incurred research & development expense on account, $4,500.

28.Incurred factory payroll costs of $123,015 (not yet paid). Of this amount, $45,000 were indirect labor costs

and the remainder direct labor costs. Direct labor workers earned $21 per hour.

29.Paid for factory janitorial services, $9.000.

29.Incurred selling expense on account, $10,500.

30.Declared and paid a $1,500 cash dividend.

30.Record $1,200 of depreciation on factory machinery and equipment for September.

30.Allocated factory overhead to production on the basis of direct labor- hours.

30.Paid cash for administrative expenses on account, $25,300.

30.Goods costing $106,000 were completed and transferred to the storeroom.

30.Sales on account for September were $152,200. The cost of goods sold was $72,000.

30.Record $700 depreciation on office equipment for September.

30.Customers paid $100,500 on account.

30.Paid payroll, $123,015.

30.Paid accounts payable, 45,000.

30.Prepaid factory insurance expired, $1,200.

30.Accrue $1,050 interest expense.

30.Calculate the overallocated or underallocated overhead and close this amount to the Cost of Goods Sold account.

Required

1. Prepare a multiple-step income statement and a classified balance sheet for September 2018.