Problem 7-60 (Static) Show Flow of Costs to Jobs (LO 7-2, 3) Kim's Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possible. Special equipment is ordered as required. On May 1, the Materials and Equipment Inventory account had a balance of $36,000. The Work-in-Process Inventory account is maintained to record costs of work not yet complete. There were two such jobs on May 1 with the following costs. Job 27 Highlands Mall Job 33 Pine Ridge Estates Materials and equipment Direct labor Overhead (applied) $15, 375 13,500 4,050 $52,500 26, 250 7,875 Overhead has been applied at 30 percent of the costs of direct labor. During May, Kim's Asphalt started two new jobs. Additional work was carried out on Jobs 27 and 33, with the latter completed and billed to Pine Ridge Estates. Details on the costs incurred on jobs during May follow. 27 33 34 35 $3,000 $4,800 $4,600 $2,900 Job Materials and equipment Direct labor (wages payable) 4,500 6,750 5,900 1,600 Other May Events 1. Received $12,500 payment on Job 24 delivered to customer in April. 2. Purchased materials and equipment for $9,400 on account. 3. Billed Pine Ridge Estates $130,000 and received payment for $75,000 of that amount. 4. Determined that payroll for indirect labor personnel totaled $650. 5. Issued supplies and incidental materials for current jobs costing $155. 5. Recorded overhead and advertising costs for the operation as follows (all cash except equipment depreciation). $550 675 320 600 Property taxes Storage area rental Truck and delivery cost Advertising and promotion campaign Inspections Telephone and other miscellaneous Equipment depreciation 200 325 450 Required: a. Prepare journal entries to record the flow of costs for operations during May. b. Calculate the amount of over- or underapplied overhead for the month. c. Determine inventory balances for Materials and Equipment Inventory and Work-in-Process Inventory. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required Required A B Prepare journal entries to record the flow of costs for operations during May. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Credit No A Transaction General Journal 01 Cash Accounts receivable Debit 12,500 12,500 B 02 9,400 Materials and equipment inventory Accounts payable 9,400 3(a) 130,000 Accounts receivable Sales revenue 130,000 D 3(b) 75,000 Cash Accounts receivable 75,000 E 04 650 Manufacturing overhead-indirect labor Wages payable 650 A Record $12,500 payment received on account. B Record purchase of materials and equipment of $9,400 on account. Record billing of $130,000. O Record the receipt of $75,000 towards the billings. Record indirect labor cost of $650. Record issue of supplies and incidental materials for current jobs costing $155. Record overhead, advertising and depreciation cost as per the table given above. Record charges to work in process. I Record transfer of Job 33
