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.| ⢠| Direct labor costs | | ⢠| Media purchases | | ⢠| Overhead applied | | ⢠| Completion of Vault Bank and Take Off Airlines campaigns |
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Chart of Accounts
| CHART OF ACCOUNTS |
| The Fly Company |
| General Ledger |
| ASSETS | | 110 | Cash | | 121 | Accounts Receivable | | 125 | Notes Receivable | | 126 | Interest Receivable | | 132 | Work in Process | | 133 | Agency Overhead | | 141 | Supplies | | 142 | Prepaid Insurance | | 143 | Prepaid Expenses | | 191 | Office Equipment | | 192 | Accumulated Depreciation-Office Equipment |
| LIABILITIES | | 210 | Accounts Payable | | 221 | Utilities Payable | | 231 | Notes Payable | | 236 | Interest Payable | | 241 | Lease Payable | | 251 | Salaries Payable | | 252 | Consultant Fees Payable |
| EQUITY | | 311 | Common Stock | | 340 | Retained Earnings | | 351 | Dividends | | 390 | Income Summary |
| | REVENUE | | 410 | Fees Earned | | 610 | Interest Revenue |
| EXPENSES | | 510 | Cost of Services | | 520 | Salaries Expense | | 531 | Selling Expenses | | 532 | Insurance Expense | | 533 | Utilities Expense | | 534 | Office Supplies Expense | | 540 | Administrative Expenses | | 560 | Depreciation Expense-Office Equipment | | 590 | Miscellaneous Expense | | 710 | Interest Expense |
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Journal Journalize the four summary entries on Aug. 31 to record each of the following for the month. Refer to the Chart of Accounts for exact wording of account titles.
