Reference no: EM132661085

Intercity Roofing manufactures and installs custom shingles for use on damaged roofs of residential houses and apartments. The company uses a specialized manufacturing process to ensure the replacement shingles are an exact match with the existing roof. The company uses a job order costing system to apply manufacturing overhead on the basis of direct labour cost. The company estimates that during the next year, it will incur $70,000 in overhead costs and will pay $140,000 in direct labour costs.

During the year, the following transactions occurred:

1. Purchased $180,000 of direct materials on account.
2. Purchased $5,000 of supplies on account. (The supplies consisted of glue and cleaning supplies.) 
3. Requisitioned $170,000 of direct materials and $4,500 of supplies for use in production.

Incurred employee costs:

Direct labour $150,000
Indirect labour40,000
Administrative salaries 190,000
Sales salaries 30,000
Sales commissions 90,000
Advertised on local television: $5,000
Rent: $12,000.

1. 40% of the space related to sales offices, 60% was a shop used in production of roofing materials.
2. Depreciation: $25,000. 70% relates to roofing equipment, 30% relates to office equipment. 
3. Insurance expired: $15,000. 90% relates to the factory, the remainder relates to insurance on the office equipment. 
4. Manufacturing overhead costs were applied to production. 
5. Goods costing $375,000 were completed. 
6. The company had sales on account of $800,000. According to cost data, the jobs cost $350,000.

requirement

Question 1: For items A through K above, record journal entries. Unless otherwise noted, assume all transactions were on account.

Question 2: Was overhead overapplied or underapplied for the period? By how much?

Question 3: Record a journal entry to close overhead to cost of goods sold.

Question 4: Based on the information above, make a income statement for the company - assume a 20% tax rate.