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 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 Expenses 532 Insurance Expense 533 Utilities Expense 534 Supplies Expense 540 Administrative Expenses 561 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

Journal

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.

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JOURNAL

ACCOUNTING EQUATION

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Final Questions

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
jan 1	Raw material inventory	500000
	accounts payable		500000
jan 2	Work in process-spinning	275000
	work in process-Tufting	110000
	Factory overhead -spinning	46000
	factory overhead -Tufting	39500
	Raw material inventory		470500
jan31	Work in process -Spinning	185000
	work in process-Tufting	98000
	Factory overhead -spinning	18500
	Factory overhead -tufting	9000
	Factory labor		310500
Jan 31	Factory overhead -spinning	12500
	Factory overhead -tufting	8500
	accumulated depreciation		21000
Jan 31	Factory overhead -spinning	2000
	Factory overhead -tufting	1000
	prepaid insurance		3000
jjan 31	work in process -spinning	80000
	workin process -Tufting	55000
	Factory overhead -spinning		80000
	Factory -tufting		55000
Jan 31	work in process-Tufting	547000
	work in process -spinning		547000
jan 31	Finsihed goods inventory	807200
	work in process -Tufting		807200
Jan 31	cost of goods sold	795200
	Finsihed goods inventory		795200

2)

Material : beginning +purchased -requistioned

    = 17000+500000-470500

    = 46500

work in process:

spinning = Beginning + cost incurred during the month -transfered to tufting

      =35000+ [275000+185000+80000]-547000

       = 28000

Tufting : 28500+[110000+98000+55000]-807200

      = -515700 *** [mistakein question faming since amount transfered to finished goods is more than balance in work in process]

finished goods inventory =Beginning +transfered - cost of goods sold

    = 62000+807200-795200

        = 74000

3)Actual overhead :

spinning : 46000+18500+12500+2000=79000

Applied overhead spinning :80000

Balance of overapplied overhead =Actual -applied

               = 79000-80000

              = -1000

Tufting :

Actual :39500+9000+8500+1000=58000

applied : 55000

underapplied overhead =58000-55000= 3000

Balance in Factory overhead :

spinning = -1000

Tufting : 3000