Vernon Corporation makes custom-order furniture to meet the needs of persons with disabilities. On January 1, 2018, the company had the following account balances: $88,000 for both cash and common stock. In 2018, Vernon worked on three jobs. The relevant direct operating costs follow:

	Direct Labor				Direct Materials
Job 1	$	4,400			$	4,600
Job 2		2,200				1,600
Job 3		8,300				3,700
Total	$	14,900			$	9,900

Vernons predetermined manufacturing overhead rate was $.40 per direct labor dollar. Actual manufacturing overhead costs amounted to $5,714. Vernon paid cash for all costs. The company completed and delivered Jobs 1 and 2 to customers during the year. Job 3 was incomplete at the end of the year. The company sold Job 1 for $16,400 cash and Job 2 for $8,700 cash. Vernon also paid $3,000 cash for selling and administrative expenses for the year.

Vernon uses a just-in-time inventory management system. Consequently, it does not have raw materials inventory. Raw materials purchases are recorded directly in the Work in Process Inventory account.

Required

1. Record the preceding events in a horizontal statements model. The first row shows beginning balances.

2. Record the entry to close the amount of underapplied or overapplied overhead for the year to Cost of Goods Sold (in the expense category) in the horizontal financial statements model.

3. Determine the gross margin for the year.

Complete this question by entering your answers in the tabs below. Required A Required B Required C Record the preceding events in a horizontal statements model. The first row shows beginning balances. (Enter co decreases to account balances with a minus sign.) Assets Finished Goods Cash Work in Process + + + Manufacturing Overhead Equity Common Retained Stock Earnings 88,000 + + Revenue - Expense Net Income 88,000 + + = + + + + + + + = + + = + = + + = + + + + + + + + + + + + + = + + + + = + + + + + + + + = + + + + = + + = + + + + + 88,000 + 01 + 01 + 01 = 88,000 + 0 0 1 0 Required A Required B Required C Record the entry to close the amount of underapplied or overapplied overhead for the year to Cost of Goods Sold (in the expense category) in the horizontal financial statements model. manufacturing overhead Required A Required B Required C Determine the gross margin for the year. Gross margin