Question
The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client.
The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 68% of media purchases.
On August 1, the four advertising projects had the following accumulated costs:
August 1 Balances Vault Bank $264,300
Take Off Airlines 70,100
Sleepy Tired Hotels 203,000
Tastee Beverages 119,100
Total $656,500
During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:
Direct LaborMedia Purchases
Vault Bank $190,000 $709,400 Take Off Airlines 80,800 615,700 Sleepy Tired Hotels 373,100 463,800 Tastee Beverages 424,000 330,600 Total $1,067,900 $2,119,500 At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.
Required: Journalize the four summary entries on August 31 to record each of the following for the month. Refer to the Chart of Accounts for exact wording of account titles.
Direct labor costs
Media purchases
Overhead applied
Completion of Vault Bank and Take Off Airlines campaigns
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