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.

CHART OF ACCOUNTSPort Ormond Carpet CompanyGeneral 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 Expenses
532	Insurance Expense
533	Utilities Expense
534	Supplies Expense
540	Administrative Expenses
561	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

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.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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	Debit	Credit
1	Raw Material Inventory	500000
	Accounts Payable		500000
2	Work in process inventory-Spinning	275000
	Work in process inventory-Tufting	110000
	Factory Overhead-Spinning	46000
	Factory Overhead-Tufting	39500
	Raw Material Inventory		470500
31	Work in process inventory-Spinning	185000
	Work in process inventory-Tufting	98000
	Manufacturing Overhead-Spinning	18500
	Manufacturing Overhead-Tufting	9000
	Labor cost payable		310500
31	Depreciation Expense-Spinning	12500
	Depreciation Expense-Tufting	8500
	Accumulated Depreciation		21000
31	Insurance Expense-Spinning	2000
	Insurance Expense-Tufting	1000
	Prepaid Insurance		3000
31	Work in process inventory-Spinning	80000
	Work in process inventory-Tufting	55000
	Factory Overhead-Spinning		80000
	Factory Overhead-Tufting		55000
31	Work in process inventory-Tufting	547000
	Work in process inventory-Spinning		547000
31	Finished Goods inventory	807200
	Work in process inventory-Tufting		807200
31	Cost of Goods Sold	795200
	Finished Goods inventory		795200

Finished Goods
Beginning	62000	795200	Cost of Goods Sold
Work in process inventory-Tufting	807200
		74000	Balance
	869200	869200
Raw Material
Beginning	17000
Accounts Payable	500000	275000	Work in process inventory-Spinning
		110000	Work in process inventory-Tufting
		46000	Factory Overhead-Spinning
		39500	Factory Overhead-Tufting
		46500	Balance
	517000	517000
Work in process inventory-Spinning
Beginning	35000	547000	Work in process inventory-Tufting
Raw Material Inventory	275000	28000	Ending WIP-Spinning
Labor Cost payable	185000
Factory Overhead	80000
	575000	575000
Work in process inventory-Tufting
Beginning	28500	807200	Finished Goods inventory
Raw Material Inventory	110000	31300	Ending Finished Goods inventory
Labor Cost payable	98000
Factory Overhead	55000
Work in process inventory-Spinning	547000
	838500	838500
Factory Overheads
Raw Material Inventory	46000	80000	Work in process inventory-Spinning
Raw Material Inventory	39500	55000	Work in process inventory-Tufting
Depreciation	21000
Insurance	3000
Balance	25500
	135000	135000