Problem 17-4

Demonstrate job costing (L.O. 7)

Log Cabin Homes, Inc., uses a job cost system to account for its jobs, which are prefabricated houses. As of January 1, 2019, its records showed inventories as follows:

Materials and supplies

$100,000

Work in process (Job Nos. 22 and 23)

180,000

Finished goods (Job No. 21)

140,000

The work in process inventory consisted of two jobs:

Job No.DirectMaterialsDirectLaborManufacturing Total

Overhead

22$36,000$40,000$20,000$96,000

2340,00028,00016,00084,000

$76,000$68,000$36,000$180,000

Cost and sales data for 2019:

1.

Materials purchased on account, $400,000.

2.

Direct materials used: Job No. 22, $60,000; Job No. 23, $120,000; Job No. 24, $180,000. Indirect materials used, $10,000.

3.

Direct labor costs: Job No. 22, $100,000; Job No. 23, $200,000; and Job No. 24, $80,000. Indirect labor costs, $80,000.

4.

Overhead is assigned to jobs at $100 per machine-hour. Job No. 22 used 500 machine-hours, Job No. 23 used 1,000 machine-hours, and Job No. 24 used 300 machine-hours in January.

5.

Job Nos. 22 and 23 were completed and transferred to Finished Goods Inventory.

6.

Job Nos. 21 and 22 were sold on account for $1,200,000, total.

7.

Manufacturing overhead costs incurred, other than indirect materials and indirect labor, were depreciation, $80,000, and heat, light, power, miscellaneous, $40,000.

a.

How should I make journal entries to assign the preceding costs to jobs. Show the appropriate entries debiting Finished Goods Inventory and Cost of Goods Sold. Transfer overapplied or underapplied overhead to Cost of Goods Sold.

b.

Assuming selling and administrative expenses were $100,000, prepare an income statement for 2019.