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:

a)Purchased $180,000 of direct materials on account.

b)Purchased $5,000 of supplies on account.(The supplies consisted of glue and cleaning supplies.)

c)Requisitioned $170,000 of direct materials and $4,500 of supplies for use in production.

d)Incurred employee costs:

i.Direct labour $150,000

ii.Indirect labour40,000

iii.Administrative salaries 190,000

iv.Sales salaries 30,000

v.Sales commissions90,000

e)Advertised on local television: $5,000

f)Rent: $12,000.40% of the space related to sales offices, 60% was a shop used in production of roofing materials.

g)Depreciation: $25,000.70% relates to roofing equipment, 30% relates to office equipment.

h)Insurance expired: $15,000.90% relates to the factory, the remainder relates to insurance on the office equipment.

i)Manufacturing overhead costs were applied to production.

j)Goods costing $375,000 were completed.

k)The company had sales on account of $800,000.According to cost data, the jobs cost $350,000.

Required:

a)For items A through K above, record journal entries.Unless otherwise noted, assume all transactions were on account.

b)Was overhead overapplied or underapplied for the period?By how much?

c)Record a journal entry to close overhead to cost of goods sold.

d)Based on the information above, prepare income statement for the company - assume a 20% tax rate.