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More Info a. Purchased materials on account, $490,000 b. Requisitioned direct materials and used direct labor in construction Sturdy Construction, Inc. is a home builder in Arizona. Sturdy uses a job order costing system in which each house is a job. Requirement 2. Prepare journal entries to record the events in the general journal. (Record debits first, then credits. Exclu c. The company incurred total wages of $250,000. Use the data from Item b to assign the wages. (Assume the wages have not bee g. Houses completed: 402, 404 Date Accounts Debit Credit h. House sold on account: 404 for $260,000 Begin by recording the re Requirement 3. T-accounts for Work-in-Process Inventory and Finished Goods Inventory have been opened for you. Post the appro Requirement 4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work- Requirement 5. Add the costs of the completed house that has not yet been sold, and show that this equals the ending balance Requirement 6. Compute gross profit on the house that was sold. What costs must gross profit cover for Sturdy Construction? S

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truction? Administration Construction wages Customer service Design Direct labor Direct materials Distribution Income taxes M

Please make sure to provide answers to fulfill the boxes above.

More Info a. Purchased materials on account, $490,000 b. Requisitioned direct materials and used direct labor in construction Recorded the materials requisitioned. Direct Materials Direct Labor House 402 $ 51,000 $ 43,000 House 403 69,000 39,000 House 404 61,000 56,000 House 405 85,000 54,000 c. The company incurred total wages of $250,000. Use the data from Item b to assign the wages. Wages are not yet paid. d. Depreciation of construction equipment, $6,500 e. Other overhead costs incurred: Equipment rentals paid in cash, $30,000; Worker liability insurance expired, $9,000 f. Allocated overhead to jobs. g. Houses completed: 402, 404 h. House sold on account 404 for $260,000 Print Done

Sturdy Construction, Inc. is a home builder in Arizona. Sturdy uses a job order costing system in which each house is a job. Because it constructs houses, the company uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of $1,000,000 and total direct labor cost of $2,000,000. The following events occurred during August: (Click the icon to view the events.) Read the requirements. Requirement 1. Calculate Sturdy's predetermined overhead allocation rate for the year. Predetermined overhead allocation rate

Requirement 2. Prepare journal entries to record the events in the general journal. (Record debits first, then credits. Exclude explanations from any journal entries.) a. Purchased materials on account, $490,000. Date Accounts Debit Credit b. Requisitioned direct materials and used direct labor in construction. Record the materials requisitioned. Date Accounts Debit Credit b.

c. The company incurred total wages of $250,000. Use the data from Item b to assign the wages. (Assume the wages have not been paid.) Date Accounts Debit Credit d. Depreciation of construction equipment, $6,500 Date Accounts Credit

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g. Houses completed: 402, 404 Date Accounts Debit Credit h. House sold on account: 404 for $260,000 Begin by recording the revenue from the sale on account. Do not record the expense related to the sale in this journal entry. We will do that in the next step. Date Accounts Debit Credit

Requirement 3. T-accounts for Work-in-Process Inventory and Finished Goods Inventory have been opened for you. Post the appropriate entries to these accounts, identifying each entry by letter. Determine the ending account balances, assuming that the beginning balances were zero. Click to view the journal entries you prepared above. Work-in-Process Inventory Finished Goods Inventory

Requirement 4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work-in-Process Inventory account Sturdy Construction, Inc. Reconciliation of Work-in-Process Inventory Subsidiary and Control Accounts Total WIP Balance Unfinished houses: Direct Materials Direct Labor Construction Overhead Total cost equals Ending WIP Inventory

Requirement 5. Add the costs of the completed house that has not yet been sold, and show that this equals the ending balance in Finished Goods Inventory. Sturdy Construction, Inc. Reconciliation of Finished Goods Inventory Subsidiary and Control Accounts Completed, unsold house: Direct Materials Direct Labor Construction Overhead Total cost equals Ending Finished Goods Inventory

Requirement 6. Compute gross profit on the house that was sold. What costs must gross profit cover for Sturdy Construction? Sturdy Construction, Inc. Gross profit on Homes Sold In August Gross profit

What costs must gross profit cover for Sturdy Construction? The gross profit must cover these types of costs:

truction? Administration Construction wages Customer service Design Direct labor Direct materials Distribution Income taxes Marketing Research and development

 · Answer

1. Predetermined overhead allocation rate = Estimated Construction Overhead / Estimated Total Direct Labor Cost = $ 1,000,000 / $ 2,000,000 * 100 = 50 % of direct labor cost.

2.

Transaction / Event	Accounts	Debit	Credit
		$	$
a.	Direct Materials	490,000
	Accounts Payable		490,000
b.	Work in Process Inventory	266,000
	Direct Materials		266,000
c.	Work in Process Inventory	192,000
	Construction Overhead	58,000
	Construction Wages Payable		250,000
d.	Construction Overhead	6,500
	Accumulated Depreciation: Equipment		6,500
e.	Construction Overhead	39,000
	Prepaid Insurance		9,000
	Cash		30,000
f.	Work in Process Inventory	96,000
	Construction Overhead		96,000
g.	Finished Goods Inventory	260,500
	Work in Process Inventory		260,500
h.	Accounts Receivable	260,000
	Construction Revenue		260,000

.

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