Job Order Cost Accounting for a Service Business

The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July:

July 3.	Charged 680 hours of professional (lawyer) time to the Obsidian Co. breech of contract suit to prepare for the trial, at a rate of $220 per hour.
10.	Reimbursed travel costs to employees for depositions related to the Obsidian case, $14,100.
14.	Charged 140 hours of professional time for the Obsidian trial at a rate of $290 per hour.
18.	Received invoice from consultants Wadsley and Harden for $57,800 for expert testimony related to the Obsidian trial.
27.	Applied office overhead at a rate of $70 per professional hour charged to the Obsidian case.
31.	Paid administrative and support salaries of $40,800 for the month.
31.	Used office supplies for the month, $13,800.
31.	Paid professional salaries of $171,200 for the month.
31.	Billed Obsidian $364,200 for successful defense of the case.

a. Provide the journal entries for each of these transactions.

July 3	Work in Process
	Salaries Payable
July 10	Work in Process
	Cash
July 14	Work in Process
	Salaries Payable
July 18	Work in Process
	Consultant Fees Payable
July 27	Office Overhead
	Cash
July 31 Admin. sal.	Office Overhead
	Cash
July 31 Supplies	Office Overhead
	Supplies
July 31 Prof. sal.	Salaries Payable
	Cash
July 31 Billed	Accounts Receivable
	Fees Earned
July 31 Cost	Cost of Services
	Work in Process

Feedback

a. Record the direct costs in Work in Process. Apply the overhead based on professional hours. Record actual overhead in the Office Overhead account. For cases completed, move the costs from Work in Process to Cost of Services.

b. How much office overhead is over- or underapplied? Enter your answer as a positive number. $ ______

c. Determine the gross profit on the Obsidian case, assuming that over- or underapplied office overhead is closed monthly to cost of services. $ _______