Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,000, direct labor of $2,800, and applied overhead of $2,240. Custom Cabinetry applies overhead at the rate of 80% of direct labor cost. During July, Job 120 is sold (on credit) for $22,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of July. Custom Cabinetry incurs the following costs during July.

 Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,000, direct labor of $2,800, and applied overhead of $2,240. Custom Cabinetry applies overhead at the rate of 80% of direct labor cost. During July, Job 120 is sold (on credit) for $22,000, Job 121 is started and completed, and Job 122 is started and still in process at the end of July. Custom Cabinetry incurs the following costs during July.
 

     Job 120    Job 121    Job 122
Direct materials used    $ 1,000    $ 6,000    $ 2,500
Direct labor used    2,200    3,700    2,100
 
1. Prepare journal entries for the following July transactions and events a through e.

Direct materials used.
Direct labor used.
Overhead applied.
Sale of Job 120.
Cost of goods sold for Job 120. Hint: Job 120 has costs from June and July.

2. Compute the July 31 balances of the Work in Process Inventory and the Finished Goods Inventory accounts. (There were no jobs in Finished Goods Inventory at June 30.)

 

 

Explanation
1.
c. Overhead applied $8,000 direct labor × 0.80 = $6,400
d. Total of direct materials, direct labor, and applied overhead; for June ($6,000 + $2,800 + $2,240) and for July ($1,000 + $2,200 + [$2,200 × 0.80]).
 
2.
Work in Process Inventory at July 31 = $6,280. (see computations below).
Equals the total cost reported on the job cost sheet for Job 122, the only job still in process at July 31.

Finished Goods Inventory at July 31 = $12,660. (see computations below).
Equals the total cost reported on the job cost sheet for Job 121, the only job finished but not sold at July 31.

Thanks