Question

Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting Department, where carpet backing is added at the beginning of the process and the process is completed. On January 1, Port Ormond Carpet Company had the following inventories:

Finished Goods	$62,000
Work in Process-Spinning Department	35,000
Work in Process-Tufting Department	28,500
Materials	17,000

Departmental accounts are maintained for factory overhead, and both have zero balances on January 1. Manufacturing operations for January are summarized as follows:

Jan.	1	Materials purchased on account, $500,000
	2	Materials requisitioned for use:
		Fiber—Spinning Department, $275,000
		Carpet backing—Tufting Department, $110,000
		Indirect materials—Spinning Department, $46,000
		Indirect materials—Tufting Department, $39,500
	31	Labor used:
		Direct labor—Spinning Department, $185,000
		Direct labor—Tufting Department, $98,000
		Indirect labor—Spinning Department, $18,500
		Indirect labor—Tufting Department, $9,000
	31	Depreciation charged on fixed assets:
		Spinning Department, $12,500
		Tufting Department, $8,500
	31	Expired prepaid factory insurance:
		Spinning Department, $2,000
		Tufting Department, $1,000
	31	Applied factory overhead:
		Spinning Department, $80,000
		Tufting Department, $55,000
	31	Production costs transferred from Spinning Department to Tufting Department, $547,000
	31	Production costs transferred from Tufting Department to Finished Goods, $807,200
	31	Cost of goods sold during the period, $795,200

	Required:
1.	Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations. Refer to the Chart of Accounts for exact wording of account titles.
2.	Compute the January 31 balances of the inventory accounts.
3.	Compute the January 31 balances of the factory overhead accounts.

2. Compute the January 31 balances of the inventory accounts.

Materials
Work in Process:
• Spinning Department
• Tufting Department
Finished Goods

3. Compute the January 31 balances of the factory overhead accounts.

Factory Overhead:
• Spinning Department
• Tufting Department

Answer 1

Date	Account titles and explanation	Debit	Credit
Jan 1	Materials	$500000
	Account payable		$500000
	(To record materials purchased on account)
Jan 2	Work in process- Spinning Department	$275000
	Work in process- Tufting Department	$110000
	Factory overhead- Spinning Department	$46000
	Factory overhead- Tufting Department	$39500
	Materials		$470500
	(To record materials transferred to work in process and factory overhead)
Jan 31	Work in process- Spinning Department	$185000
	Work in process- Tufting Department	$98000
	Factory overhead- Spinning Department	$18500
	Factory overhead- Tufting Department	$9000
	Wages payable		$310500
	(To record materials transferred to work in process and factory overhead)
Jan 31	Factory overhead- Spinning Department	$12500
	Factory overhead- Tufting Department	$8500
	Accumulated depreciation		$21000
	(To record depreciation expense)
Jan 31	Factory overhead- Spinning Department	$2000
	Factory overhead- Tufting Department	$1000
	Prepaid insurance		$3000
	(To record prepaid insurance expired)
Jan 31	Work in process- Spinning Department	$80000
	Work in process- Tufting Department	$55000
	Factory overhead- Spinning Department		$80000
	Factory overhead- Tufting Department		$55000
	(To record factory overhead applied)
Jan 31	Work in process- Tufting Department	$547000
	Work in process- Spinning Department		$547000
	(To record transferred of production cost transferred from Spinning Department to Tufting Department)
Jan 31	Finished goods	$807200
	Work in process- Tufting Department		$807200
	(To record transferred of production cost transferred from Tufting Department to finished goods)
Jan 31	Cost of goods sold	$795200
	Finished goods		$795200
	(To record cost of goods sold)

2)

Calculation of Materials, January 31= $17000+500000-470500= $46500

Calculation of Work in Process, Spinning Department, January 31= $35000+275000+185000+80000-547000= $28000

Calculation of Work in Process, Tufting Department, January 31= $28500+110000+98000+55000+547000-807200= $31300

Calculation of Ending Finished goods inventory= $62000+807200-795200= $74000

3)

Calculation of Factory overhead, Spinning Department, January 31= $46000+18500+12500+2000-80000= $-1000 Credit balance

Calculation of Factory overhead, Tufting Department, January 31= $39500+9000+8500+1000-55000= $3000 Debit balance