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 65% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank $270,000 Take Off Airlines 80,000 Sleepy Tired Hotels 210,000 Tastee Beverages 115,000 Total $675,000 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 $190,000 $710,000 Take Off Airlines 85,000 625,000 Sleepy Tired Hotels 372,000 455,000 Tastee Beverages 421,000 340,000 Total $1,068,000 $2,130,000 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: 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.

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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having trouble figuring out the Cost of Services? any advice?

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 65% of media purchases.

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

	August 1 Balances
Vault Bank	$270,000
Take Off Airlines	80,000
Sleepy Tired Hotels	210,000
Tastee Beverages	115,000
Total	$675,000

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	$190,000	$710,000
Take Off Airlines	85,000	625,000
Sleepy Tired Hotels	372,000	455,000
Tastee Beverages	421,000	340,000
Total	$1,068,000	$2,130,000

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:

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.

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