Reference no: EM132684515
Problem - Job order cost accounting entries for a service business
The law firm of Yoo and Sachs accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July:
July 3. Charged 500 hours of professional (lawyer) time to the Liddy Co. breech of contract suit to prepare for the trial, at a rate of $150 per hour.
July 9. Reimbursed travel costs to employees for depositions related to the Liddy case, $18,500
July 10. Charged 250 hours of professional time for the Liddy trial at a rate of $225 per hour.
July 15. Received invoice from consultants Mack and Corzine for $55,000 for expert testimony related to the Liddy trial.
July 22. Applied offi ce overhead at a rate of $60 per professional hour charged to the Liddy case.
July 31. Paid secretarial and administrative salaries of $32,000 for the month.
July 31. Used offi ce supplies for the month, $10,000.
July 31. Paid professional salaries of $126,000 for the month.
July 31. Billed Liddy $365,000 for successful defense of the case.
Required -
a. Provide the journal entries for each of the above transactions.
b. How much office overhead is over- or underapplied?
c. Determine the gross profit on the Liddy case, assuming that over- or underapplied office overhead is closed monthly to cost of services.