Intercity Roofing manufactures and installs custom shingles for use on damaged roofs of residential houses and apartments.The company uses a specialized manufacturing process to ensure the replacement shingles are an exact match with the existing roof.The company uses a job order costing system to apply manufacturing overhead on the basis of direct labour cost.The company estimates that during the next year, it will incur $70,000 in overhead costs and will pay $140,000 in direct labour costs.

During the year, the following transactions occurred:

1. Purchased $180,000 of direct materials on account.
2. Purchased $5,000 of supplies on account.(The supplies consisted of glue and cleaning supplies.)
3. Requisitioned $170,000 of direct materials and $4,500 of supplies for use in production.
4. Incurred employee costs:
5. Direct labour$150,000
6. Indirect labour40,000
7. Administrative salaries190,000
8. Sales salaries30,000
9. Sales commissions90,000
10. Advertised on local television: $5,000
11. Rent: $12,000.40% of the space related to sales offices, 60% was a shop used in production of roofing materials.
12. Depreciation: $25,000.70% relates to roofing equipment, 30% relates to office equipment.
13. Insurance expired: $15,000.90% relates to the factory, the remainder relates to insurance on the office equipment.
14. Manufacturing overhead costs were applied to production.
15. Goods costing $375,000 were completed.
16. The company had sales on account of $800,000.According to cost data, the jobs cost $350,000.

requirement

1. For itemsA through Kabove, record journal entries.Unless otherwise noted, assume all transactions were on account.
2. Was overhead overapplied or underapplied for the period?By how much?
3. Record a journal entry to close overhead to cost of goods sold.
4. Based on the information above, make a income statement for the company - assume a 20% tax rate.