Reference no: EM132961164

The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 63% of media purchases.

On August 1, the four advertising projects had the following accumulated costs:

August 1 Balances
Vault Bank $260,700
Take Off Airlines 80,100
Sleepy Tired Hotels 212,900
Tastee Beverages106,800
Total$660,500

During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:

                                           Direct Labor                Media Purchases
Vault Bank                        $180,100                   $707,800
Take Off Airlines                  84,000                      631,700
Sleepy Tired Hotels               374,400                   453,900
Tastee Beverages                 427,800                    343,300
Total                                $1,066,300                    $2,136,700

At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.

Required:

Problem 1: Journalize the four summary entries on August 31 to record each of the following for the month. Refer to the Chart of Accounts for exact wording of account titles.

• Direct labor costs
• Media purchases
• Overhead applied
• Completion of Vault Bank and Take Off Airlines campaigns