The law firm of Jarvis and Hunt accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during March:
Mar. 7 Charged 420 hours of professional (lawyer) time to the Masco Co. breech of contract suit to prepare for the trial, at a rate of $150 per hour.
11 Reimbursed travel costs to employees for depositions related to the Masco case, $24,000.
22 Charged 250 hours of professional time for the Masco trial at a rate of $200 per hour.
25 Received invoice from consultants Jarvis and Hunt for $45,000 for expert testimony related to the Masco trial.
30 Applied office overhead at a rate of $50 per professional hour charged to the Masco case.
31 Paid secretarial and administrative salaries of $28,000 for the month.
31 Used office supplies for the month, $4,000.
31 Paid professional salaries of $63,000 for the month.
31 Billed Masco $250,000 for successful defense of the case.
a. Provide the journal entries for each of the above transactions.
b. How much office overhead is over- or underapplied?
c. Determine the gross profit on the Masco case, assuming that over- or underapplied office overhead is closed annually to cost of services.