Question about gross profit
For the year ended December 31, 2008, the job cost sheets of DeVoe Company contained the following data.
Job Number Explanation Direct Materials Direct Labor Manufacturing Overhead Total Costs
7640 Balance 1/1 $25,000 $24,000 $28,800 $ 77,800
Current year's costs 30,000 36,000 43,200 109,200
7641 Balance 1/1 11,000 18,000 21,600 50,600
Current year's costs 43,000 48,000 57,600 148,600
7642 Current year's costs 48,000 55,000 66,000 169,000
Other data:
1. Raw materials inventory totaled $15,000 on January 1. During the year, $140,000 of raw materials were purchased on account.
2. Finished goods on January 1 consisted of Job No. 7638 for $87,000 and Job No. 7639 for $92,000.
3. Job No. 7640 and Job No. 7641 were completed during the year.
4. Job Nos. 7638, 7639, and 7641 were sold on account for $530,000.
5. Manufacturing overhead incurred on account totaled $120,000.
6. Other manufacturing overhead consisted of indirect materials $14,000, indirect labor $20,000, and depreciation on factory machinery $8,000.
Hint:
Prepare entries in a job cost system and partial income statement.
Instructions
(a) Prove the agreement of Work in Process Inventory with job cost sheets pertaining to unfinished work. Hint: Use a single T account for Work in Process Inventory. Calculate each of the following, then post each to the T account: (1) beginning balance, (2) direct materials, (3) direct labor, (4) manufacturing overhead, and (5) completed jobs.
(b) Prepare the adjusting entry for manufacturing overhead, assuming the balance is allocated entirely to Cost of Goods Sold.
(c) Determine the gross profit to be reported for 2008.