Kenta Consulting provides financial and estate planning services on a retainer basis for the executive officers of its corporate clients. It incurred the following labor costs on services for three corporate clients during March 2014.
Direct Labor
Contract 1 ....... $18,000
Contract 2 ....... 7,200
Contract 3 ....... 28,800
Total ........ $54,000
Kenta allocated March overhead costs of $27,000 to the contracts based on the amount of direct labor costs incurred on each contract.

a. Assuming the revenue from Contract 3 was $80,000, what amount of income did Kenta earn from this contract?
b. Based on the preceding information, will Kenta report finished goods inventory on its balance sheet for Contract 1? If so, what is the amount of this inventory? If not, explain why not.

  • CreatedFebruary 07, 2014
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