Problem 1 - Quality Painters Quality Painters, Inc., uses a job cost system. As of January 1, its records showed the following inventory balances: Materials $12,000 Work in process $50,000 (consisting of Job 100 $30,000 and Job 101 $20,000) Finished goods SO (no jobs were finished and unsold as of Jan 1) Here are data for the company in January: a. Materials purchased, $85,000. b. Direct materials used: direct materials for Job No. 100, S15,500, for Job No. 101, $28,500; and for Job No. 102 (a new job). $48.000 c. Supplies (indirect materials) used amounted to $5,500. d. Direct labor costs: direct labor to Job No. 100. $22,500; to Job No 101, $40,000, and to Job No. 102, $50,000. c. Indirect labor, $22,500. Overhead is assigned to jobs at $8 per labor-hour, with 500 labor-hours to Job 100 and 2.500 labor-hours each to Jobs 101 and 102. 8 Jobs 100 and 102 were completed in January (Job 101 was not finished) h Sales revenues for January were $250,000 for Job 100 (Job 102 has not been sold) i. Actual overhead costs incurred other than indirect labor and indirect materials were depreciation, $8,000, and utilities, fuel and miscellaneous, $15,500 which is scheduled to be paid next month. J. Was overhead under-or over-applied? Make a journal entry to correct any difference, if needed Required: 1. Prepare a job cost sheet for each job. 2. Prepare journal entries for the January activity (labeled a to jabove) assuming all purchases and sales were on credit. 3. Prepare an income statement for January assuming selling and administrative expenses for January were $65,000. 4. Is the company profitable (that is, showing net income greater than zero)? What suggestions can you make for management to help increase the company's net income? 7 101 102 Total Self Check: 8 9 30 11 1. Calculate the Job Cost for each job: 100 Beg. Work in Process Inventory Direct Materials Direct Labor Applied Overhead ($10 per labor hour x labor hours) Total Actual Job Cost $ Self Check on Job Costs: $ $ $ show calculations in this row $ $2 $ $ 45 2. Prepare Journal Entries Debit Credit Purchased materials on account (a) Assign direct material costs to jobs. (b) Assign indirect material (supplies) cost used (c) Assign direct labor costs to jobs (d) Assign Indirect labor cost used(e) Apply overhead costs to jobs in Transfer costs of all jobs to Finished Goods Inventory (a) Record sale of all jobs h - part 1) Transfer costs of all jobs to Cost of Goods Sold expense (h-part 2) Record actual overhead costs incurred (1) assume non-depreciation expenses will be paid next month Calculate and record any over or under applied overhead () 3. Prepare the multi-step income statement Quality Painters Income Statement For Month Ended January 31 Sales Less: Cost of Goods Sold Gross Profit Selling and Admin Expenses Net Income