Managerial acctg record the events in the general journal. start

Widget Construction, Inc., is a home builder in New Mexico.  Widget uses a job order costing
 

system in which each house is a job.  Because it constructs houses, the company uses accounts
 

titled Construction wages and Construction overhead.  The following events occurred during 
 

August:
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
a. Purchased Materials on account $470,000
 
 
 

 
b. Incurred Contrstucion wages of $230,000.  Requisitioned direct materials and used direct labor in construction:

 
 
 
 
Direct Materials
Direct Labor

 
 
House 402
 $        58,000
 
 $          40,000
 

 
 
House 403
 $        63,000
 
 $          34,000
 

 
 
House 404
 $        60,000
 
 $          52,000
 

 
 
House 405
 $        89,000
 
 $          51,000
 

 
c. Deprectaion of construction equipment $6,800
 
 
 

 
d. Other overhead costs incurred on houses 402 through 405.
 
 

 
 
Indirect Labor
 
 
 $          44,000
 

 
 
Equipment rentals in cash
 
 
 $          33,000
 

 
 
Worker liability insurance expired
 
 $            7,000
 

 
e. Allocated overhead to jobs at the predetermined rate of 40% of direct labor cost
 

 
f. Houses completed 402 and 404
 
 
 
 

 
g. House 404 Sold for $220,000
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverables
 
 
 
 
 
 

 
 
 
 
 
 
 
 

1.  
Record the events in the general journal
 
 
 
 

2.  
Post the appropriate entries to the T-accounts, identifying each entry by letter.  Determine the

 
ending account balances, assuming that the beginning balances were zero.
 
 

3.  
Add the costs of the unfinished houses, and show that this total amount equals the ending
 

 
balances in the Work in process inventory account.
 
 
 

4.  
Add the cost of the completed house that has not yet been sold, and show that this equals
 

 
the ending balance in Finished goods inventory.
 
 
 

5.  
Compute gross profit on the house that was sold.  What costs must gross profit cover for
 

 
Sherborn Construction?
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 1
 
 
 
 
 
 

 
Record the events in the general journal.  Start with the entry from event (a).
 

 
 
 
 
 
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
a.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Event (b) has two journal entries to record.  First record the construction wages.
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
b.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Now record the requisitioned direct materials and direct labor used.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
b.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Next record the depreciation of construction equipment, $6,800.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
c.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the overhead costs incurred on houses 402 through 405.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
d.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the allocated overhead to jobs at the predetermined rate of 40% of direct labor cost.
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
e.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the completed houses 402 and 404 in event (f).
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
f.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Begin by recording the revenue from the sale of house 404.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
g.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Next record the cost of goods sold from the sale of house 404.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
g.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 2
 
 
 
 
 
 

 
Post the appropriate entries to the Work in process inventory and Finished goods
 

 
inventory T-accounts.  Identify each entry by letter and determine the ending account
 

 
balances.  The sharded area is for the letter.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Work in process inventory
 
 
 
 

(b)
 
(f)
 
 
 
 
 

(e)
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Bal.
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Finished goods inventory
 
 
 
 

(f)
 
(g)
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Bal.
               –  
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 3
 
 
 
 
 
 

 
Show how the costs of the unfinished houses equals the ending balance in 
 

 
Work in process inventory.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 

 
Reconciliation of Work in process inventory Subsidiary
 

 
and Control Accounts
 

 
 
 
 
 House #403 
 House #405 
 Total WIP Balance 
 

 
Unfinished houses:
 
 
 
 

 
    Direct materials
 
 
 
 
 

 
    Direct labor
 
 
 
 
 

 
    Manufac. overhead -40% of labor
 
 
 
 

 
Total costs = Work in Process
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 4
 
 
 
 
 
 

 
Show how the costs of the completed houses equals the ending balance in 
 

 
Finished goods inventory.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 

 
Reconciliation of Finished goods inventory Subsidiary
 

 
and Control Accounts
 

 
 
 
 
 
 House#402 
 Total Finished Goods Bal. 
 

 
Completed, unsold house:
 
 
 
 

 
    Direct materials
 
 
 
 
 

 
    Direct labor
 
 
 
 
 

 
    Manufac. overhead -40% of labor
 
 
 
 

 
Total cost = Finished Goods bal.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 5
 
 
 
 
 
 

 
Compute the gross profit for the house that was sold.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 
 
 

 
Gross profit on Homes Sold in August
 
 
 

 
 
 
 
House #404
 
 
 

 
Sales revenue
 
 
 
 
 

 
Less: Cost of goods sold
 
 
 
 

 
Gross profit
 
 
 
 
 

 
 
 
 
 
 
 
 

 
The gross profit must cover these types of costs:

Managerial acctg record the events in the general journal. start

Widget Construction, Inc., is a home builder in New Mexico.  Widget uses a job order costing
 

system in which each house is a job.  Because it constructs houses, the company uses accounts
 

titled Construction wages and Construction overhead.  The following events occurred during 
 

August:
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
a. Purchased Materials on account $470,000
 
 
 

 
b. Incurred Contrstucion wages of $230,000.  Requisitioned direct materials and used direct labor in construction:

 
 
 
 
Direct Materials
Direct Labor

 
 
House 402
 $        58,000
 
 $          40,000
 

 
 
House 403
 $        63,000
 
 $          34,000
 

 
 
House 404
 $        60,000
 
 $          52,000
 

 
 
House 405
 $        89,000
 
 $          51,000
 

 
c. Deprectaion of construction equipment $6,800
 
 
 

 
d. Other overhead costs incurred on houses 402 through 405.
 
 

 
 
Indirect Labor
 
 
 $          44,000
 

 
 
Equipment rentals in cash
 
 
 $          33,000
 

 
 
Worker liability insurance expired
 
 $            7,000
 

 
e. Allocated overhead to jobs at the predetermined rate of 40% of direct labor cost
 

 
f. Houses completed 402 and 404
 
 
 
 

 
g. House 404 Sold for $220,000
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverables
 
 
 
 
 
 

 
 
 
 
 
 
 
 

1.  
Record the events in the general journal
 
 
 
 

2.  
Post the appropriate entries to the T-accounts, identifying each entry by letter.  Determine the

 
ending account balances, assuming that the beginning balances were zero.
 
 

3.  
Add the costs of the unfinished houses, and show that this total amount equals the ending
 

 
balances in the Work in process inventory account.
 
 
 

4.  
Add the cost of the completed house that has not yet been sold, and show that this equals
 

 
the ending balance in Finished goods inventory.
 
 
 

5.  
Compute gross profit on the house that was sold.  What costs must gross profit cover for
 

 
Sherborn Construction?
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 1
 
 
 
 
 
 

 
Record the events in the general journal.  Start with the entry from event (a).
 

 
 
 
 
 
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
a.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Event (b) has two journal entries to record.  First record the construction wages.
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
b.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Now record the requisitioned direct materials and direct labor used.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
b.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Next record the depreciation of construction equipment, $6,800.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
c.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the overhead costs incurred on houses 402 through 405.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
d.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the allocated overhead to jobs at the predetermined rate of 40% of direct labor cost.
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
e.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Record the completed houses 402 and 404 in event (f).
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
f.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Begin by recording the revenue from the sale of house 404.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
g.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Next record the cost of goods sold from the sale of house 404.
 
 
 

 
Journal Entry

 
Date
Accounts
Debit
Credit

 
g.
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 2
 
 
 
 
 
 

 
Post the appropriate entries to the Work in process inventory and Finished goods
 

 
inventory T-accounts.  Identify each entry by letter and determine the ending account
 

 
balances.  The sharded area is for the letter.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Work in process inventory
 
 
 
 

(b)
 
(f)
 
 
 
 
 

(e)
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Bal.
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Finished goods inventory
 
 
 
 

(f)
 
(g)
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Bal.
               –  
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 3
 
 
 
 
 
 

 
Show how the costs of the unfinished houses equals the ending balance in 
 

 
Work in process inventory.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 

 
Reconciliation of Work in process inventory Subsidiary
 

 
and Control Accounts
 

 
 
 
 
 House #403 
 House #405 
 Total WIP Balance 
 

 
Unfinished houses:
 
 
 
 

 
    Direct materials
 
 
 
 
 

 
    Direct labor
 
 
 
 
 

 
    Manufac. overhead -40% of labor
 
 
 
 

 
Total costs = Work in Process
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 4
 
 
 
 
 
 

 
Show how the costs of the completed houses equals the ending balance in 
 

 
Finished goods inventory.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 

 
Reconciliation of Finished goods inventory Subsidiary
 

 
and Control Accounts
 

 
 
 
 
 
 House#402 
 Total Finished Goods Bal. 
 

 
Completed, unsold house:
 
 
 
 

 
    Direct materials
 
 
 
 
 

 
    Direct labor
 
 
 
 
 

 
    Manufac. overhead -40% of labor
 
 
 
 

 
Total cost = Finished Goods bal.
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Deliverable 5
 
 
 
 
 
 

 
Compute the gross profit for the house that was sold.
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
Widget Construction, Inc.
 
 
 

 
Gross profit on Homes Sold in August
 
 
 

 
 
 
 
House #404
 
 
 

 
Sales revenue
 
 
 
 
 

 
Less: Cost of goods sold
 
 
 
 

 
Gross profit
 
 
 
 
 

 
 
 
 
 
 
 
 

 
The gross profit must cover these types of costs:

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