Final answer:
To record service salaries and wages for Ruiz Engineering Contractors, the company must make journal entries for direct labor, indirect labor, and the application of overhead at a rate of 21% of direct labor costs.
Step-by-step explanation:
The question deals with how to record the entries to assign service salaries and wages and to apply overhead for a contracting company. Ruiz Engineering Contractors has incurred service salaries and wages totaling $37,900 for a project, which includes both direct and indirect labor costs. The direct labor cost is $26,400 and the indirect labor cost is $11,500. Additionally, the company applies overhead at a rate of 21% of direct labor cost. To record these amounts, journal entries for the direct and indirect labor expenses and the application of overhead would be made in the company's accounting system.
Direct Labor:
- Debit Work in Process $26,400
- Credit Salaries and Wages Payable $26,400
Indirect Labor:
- Debit Manufacturing Overhead $11,500
- Credit Salaries and Wages Payable $11,500
Applied Overhead:
- Debit Work in Process $5,544 (21% of $26,400)
- Credit Manufacturing Overhead $5,544