The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July: July 3. Charged 690 hours of professional (lawyer) time to the Obsidian Co. breech of contract suit to prepare for the trial, at a rate of $230 per hour. 10. Reimbursed travel costs to employees for depositions related to the Obsidian case, $24,100. 14. Charged 320 hours of professional time for the Obsidian trial at a rate of $270 per hour. 18. Received invoice from consultants Wadsley and Harden for $51,100 for expert testimony related to the Obsidian trial. 27. Applied office overhead at a rate of $65 per professional hour charged to the Obsidian case. 31. Paid administrative and support salaries of $46,600 for the month. 31. Used office supplies for the month, $15,800. 31. Paid professional salaries of $183,400 for the month. 31. Billed Obsidian $440,100 for successful defense of the case. a. Provide the journal entries for each of these transactions. b. How much office overhead is over- or underapplied? Enter your answer as a positive number. c. Determine the gross profit on the Obsidian case, assuming that over- or underapplied office overhead is closed monthly to cost of services.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July:

July 3.	Charged 690 hours of professional (lawyer) time to the Obsidian Co. breech of contract suit to prepare for the trial, at a rate of $230 per hour.
10.	Reimbursed travel costs to employees for depositions related to the Obsidian case, $24,100.
14.	Charged 320 hours of professional time for the Obsidian trial at a rate of $270 per hour.
18.	Received invoice from consultants Wadsley and Harden for $51,100 for expert testimony related to the Obsidian trial.
27.	Applied office overhead at a rate of $65 per professional hour charged to the Obsidian case.
31.	Paid administrative and support salaries of $46,600 for the month.
31.	Used office supplies for the month, $15,800.
31.	Paid professional salaries of $183,400 for the month.
31.	Billed Obsidian $440,100 for successful defense of the case.

a. Provide the journal entries for each of these transactions.

b. How much office overhead is over- or underapplied? Enter your answer as a positive number.

c. Determine the gross profit on the Obsidian case, assuming that over- or underapplied office overhead is closed monthly to cost of services.

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