Log Cabin Homes, Inc., uses a job cost system to account for its jobs, which are prefabricated houses. As of January 1, 2014, 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.
|
Direct Materials
|
Direct Labor
|
Manufacturing Overhead
|
Total
|
|
22
|
$36,000
|
$40,000
|
$20,000
|
$ 96,000
|
|
23
|
40,000
|
28,000
|
16,000
|
84,000
|
|
|
$76,000
|
$68,000
|
$36,000
|
$180,000
|
Cost and sales data for 2014:
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. ON erhead is assigned to jobs at $100 per machine-hour. Job No. 22 used 500 machine hours. Job No. 1 3 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. Prepare 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 2014.