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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 175 hours of professional (lawyer) time to the Obsidian Co. breech of
contract suit to prepare for the trial, at a rate of $150 per hour.
10. Reimbursed travel costs to employees for depositions related to the Obsidian
case, $12,500.
14. Charged 260 hours of professional time for the Obsidian trial at a rate of $185 per hour.
18. Received invoice from consultants Wadsley and Harden for $30,000 for expert testimony related to the Obsidian trial.
27. Applied office overhead at a rate of $62 per professional hour charged to the Obsidian case.
31. Paid administrative and support salaries of $28,500 for the month.
31. Used office supplies for the month, $4,000.
31. Paid professional salaries of $74,350 for the month.
31. Billed Obsidian $172,500 for successful defense of the case.
a. Provide the journal entries for each of these transactions.
b. How much office overhead is over- or und erapplied?
c. Determine the gross profit on the Obsidian case, assuming that over-or under applied office overhead is closed monthly to cost of services.
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