Preprah Engineering Contractors incurred service salaries and wages of $39,500 ($30,000 direct

Preprah Engineering Contractors incurred service salaries and wages of $39,500 ($30,000 direct and $9,500 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor.

The company uses Operating Overhead in place of Manufacturing Overhead and it uses Service Contracts in Process in place of Work in Process.

Record the entries to assign service salaries and wages and to apply overhead.

Record the entries to assign service salaries and wages.

Service Contracts Debit $39,000
Operating Overhead Credit $9,500
service salaries and wages credit $30,000

Operating Overhead is used for indirect labor .
Record the entries to apply overhead.

Service Contracts Debit (25% x $30,000)$7,500
Operating Overhead Credit $7,500

In case of apply the overhead must be credit and Service Contracts is debit.

In this question Service Contracts is used as a Work-in-process.