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.

Answer 1

Port Ormond Carpet Company

1. Journal Entries:

Jan. 31 Debit Materials $500,000

Credit Accounts payable $500,000

To record the purchase of materials on account.

Jan. 31 Debit Work-in-Process - Spinning $275,000

Credit Materials $275,000

To record the materials requisitioned.

Jan. 31 Debit Work-in-Process -Tufting $110,000

Credit Materials $110,000

To record carpet backing

Jan. 2 Debit Factory Overhead - Spinning $46,000

Debit Factory Overhead - Tufting $39,500

Credit Materials $85,500

To record indirect materials used.

Jan. 31 Debit Work-in-Process - Spinning $185,000

Debit Work-in-Process - Tufting $98,000

Credit Factory Payroll $283,000

To record direct labor costs.

Jan 31: Debit Overhead - Spinning $18,500

Debit Overhead - Tufting $9,000

Credit Factory Payroll $27,500

To record indirect labor costs.

Jan. 31: Debit Factory Overhead - Spinning $12,500

Debit Factory Overhead - Tufting $8,500

Credit Factory Depreciation Expense $21,000

To record depreciation costs.

Jan. 31:

Debit Factory Overhead - Spinning $2,000

Debit Factory Overhead - Tufting $1,000

Credit Factory Insurance $3,000

To record insurance costs.

Jan. 31 Debit Work-in-Process - Spinning $80,000

Credit Factory Overhead - Spinning $80,000

To record overhead costs applied.

Jan. 31 Debit Work-in-Process - Tufting $55,000

Credit Factory Overhead $55,000

To record overhead costs applied.

Jan. 31 Debit Work-in-Process - Tufting $547,000

Credit Work-in-Process - Spinning $547,000

To record the transfer to Tufting department.

Jan. 31 Debit Finished Goods Inventory $807,200

Credit Work-in-Process- Tufting $807,200

To record the transfer to Finished Goods.

Jan. 31 Debit Cost of Goods Sold $795,200

Credit Finished Goods $795,200

To record the cost of goods sold.

2. January 31 balances of the inventory accounts:

Finished Goods = $74,000

Work-in-Process - Spinning = $28,000

Work-in-Process - Tufting = $31,300

Materials = $46,500

3. Factory Overhead Accounts Balances:

Spinning $1,000 (Debit)

Tufting $3,000 (Credit)

Step-by-step explanation:

a) Data and Calculations:

January 1 Inventories:

Finished Goods = $62,000

Work in Process- Spinning = $35,000

Work in Process - Tufting = $28,500

Materials = $17,000

Finished Goods

Account Titles Debit Credit

Jan. 1 Beginning balance $62,000

Jan. 2 Work-in-Process-Tufting 807,200

Jan. 31 Cost of Goods Sold $795,200

Jan. 31 Ending balance 74,000

Work-in-Process - Spinning

Account Titles Debit Credit

Beginning balance $35,000

Jan. 2 Materials 275,000

Jan. 31 Direct labor 185,000

Applied overhead 80,000

Work-in-Process -Tufting $547,000

Jan. 31 Ending balance 28,000

Work-in-Process - Tufting

Account Titles Debit Credit

Jan. 1 Beginning balance $28,500

Jan. 2 Carpet backing 110,000

Jan. 31 Direct labor 98,000

Jan. 31 Applied overhead 55,000

Jan. 31 WIP- Spinning 547,000

Jan. 31 Finished Goods $807,200

Jan. 31 Ending balance 31,300

Cost of Goods Sold

Account Titles Debit Credit

Jan. 31 Finished Goods $795,200

Materials

Account Titles Debit Credit

Jan. 1 Beginning balance $17,000

Jan. 2 Accounts payable 500,000

Jan. 31 Work-in-Process - Spinning $275,000

Jan. 31 Work-in-Process - Spinning 46,000

Jan. 31 Factory Overhead - Tufting 39,500

Jan. 31 Factory Overhead - Tufting 110,000

Jan. 31 Ending balance 46,500

Factory Overhead - Spinning

Account Titles Debit Credit

Jan. 31 Materials - Spinning 46,000

Jan. 31 Payroll - Spinning 18,500

Jan. 31 Depreciation - Spinning 12,500

Jan. 31 Factory insurance-Spinning 2,000

Jan. 31 Work in Process 80,000

Jan. 31 Balance 1,000

Factory Overhead - Tufting

Account Titles Debit Credit

Jan. 31 Materials - Tufting 39,500

Jan. 31 Payroll - Tufting 9,000

Jan. 31 Depreciation - Tufting 8,500

Jan. 31 Factory insurance- Tufting 1,000

Jan. 31 Work in Process 55,000

Jan. 31 Balance 3,000