Question

a. 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.

CHART OF ACCOUNTS
Port Ormond Carpet Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable 125 Notes Receivable 126 Interest Receivable 131 Materials 141 Work in Process-Spinning Department 142 Work in Process-Tufting Department 151 Factory Overhead-Spinning Department 152 Factory Overhead-Tufting Department 161 Finished Goods 171 Supplies 172 Prepaid Insurance 173 Prepaid Expenses 181 Land 191 Factory 192 Accumulated Depreciation-Factory LIABILITIES 210 Accounts Payable 221 Utilities Payable 231 Notes Payable 236 Interest Payable 251 Wages Payable EQUITY 311 Common Stock 340 Retained Earnings 351 Dividends	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Selling Expense 532 Insurance Expense 533 Utilities Expense 534 Supplies Expense 540 Administrative Expense 561 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

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

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

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

Factory Overhead:
• Spinning Department
• Tufting Department

Answer 1

1.

Date		Debit	Credit
Jan-01	Materials	500,000.00
	Accounts Payable		500,000.00
Jan-02	Work in Progress- Spinning Department	275,000.00
	Work in Progress- Tufting Department	110,000.00
	Factory Overhead- Spinning Department	46,000.00
	Factory Overhead- Tufting Department	39,500.00
	Materials		470,500.00
Jan-31	Work in Progress- Spinning Department	185,000.00
	Work in Progress- Tufting Department	98,000.00
	Factory Overhead- Spinning Department	18,500.00
	Factory Overhead- Tufting Department	9,000.00
	Wages payable		310,500.00
Jan-31	Factory Overhead- Spinning Department	12,500.00
	Factory Overhead- Tufting Department	8,500.00
	Accumulated Depreciation		21,000.00
Jan-31	Factory Overhead- Spinning Department	2,000.00
	Factory Overhead- Tufting Department	1,000.00
	Prepaid insurance		3,000.00
Jan-31	Work in Progress- Spinning Department	80,000.00
	Work in Progress- Tufting Department	55,000.00
	Factory Overhead- Spinning Department		80,000.00
	Factory Overhead- Tufting Department		55,000.00
Jan-31	Work in Progress- Tufting Department	547,000.00
	Work in Progress- Spinning Department		547,000.00
Jan-31	Finished Goods inventory	807,200.00
	Work in Progress- Tufting Department		807,200.00
Jan-31	Cost of Goods Sold	795,200.00
	Finished Goods inventory		795,200.00

2.

	Material	Work in Progress	Finished Goods
		Spinning Department	Tufting Department
Beginning Balance	62,000.00	35,000.00	28,500.00	17,000.00
Addition	500,000.00	540,000.00	810,000.00	807,200.00
Usage	- 470,500.00	- 547,000.00	- 807,200.00	- 795,200.00
Ending Balance	91,500.00	28,000.00	31,300.00	29,000.00