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 Department35,000
Work in Process-Tufting Department28,500
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:
A. Materials purchased on account . . . . . . . . . . . . . . . .$500,000
B. Materials requisitioned for use:
Fiber—Spinning Department . . . . . . . . . . . . . . . . . . . . . $275,000
Carpet backing—Tufting Department . . . . . . . . . . . . . . . .110,000
Indirect materials—Spinning Departme . . . . . . . . . . . . . . . 46,000
Indirect materials—Tufting Departme. . . . . . . . . . . . . . . . . 39,500
C. 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
D. Depreciation charged on fixed assets:
Spinning Department . . . . . . . . . . . . . .. . . . . . . . . . . . . . $12,500
Tufting Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,500
E. Expired prepaid factory insurance
Spinning Department . . . . . . . . . .. . . . . . . . . . . . . . . . . . . $2,000
Tufting Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
F. Applied factory overhead:
Spinning Department . . . . . . . . . . . . . . . . . . . . . . . . . . . .$80,000
Tufting Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000
G. Production costs transferred from Spinning Department to Tufting Department .
$547,000
H. Production costs transferred from Tufting Department to Finished Goods .
$807,200
I. Cost of goods sold during the period . . . . . . . . . . . . . . .$795,200
Instructions
1. Journalize the entries to record the operations, identifying each entry by letter.
2. Compute the January 31 balances of the inventory accounts.
3. Compute the January 31 balances of the factory overhead accounts.

1. Journal Entries:

A. Debit Materials $500,000

Credit Accounts payable $500,000

To record the purchase of materials on account.

B. Debit Work-in-Process - Spinning $275,000

Credit Materials $275,000

To record the materials requisitioned.

B. Debit Work-in-Process -Tufting $110,000

Credit Materials $110,000

To record carpet backing

B. Debit Overhead - Spinning $46,000

   Debit Overhead - Tufting $39,500

   Credit Materials $85,500

To record indirect materials used.

C. Debit Work-in-Process - Spinning $185,000

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

   Credit Factory labor $283,000

To record direct labor costs.

C. Debit Overhead - Spinning $18,500

   Debit Overhead - Tufting $9,000

   Credit Factory labor $27,500

To record indirect labor costs.

D. Debit Overhead - Spinning $12,500

   Debit Overhead - Tufting $8,500

   Credit Factory Depreciation $21,000

To record depreciation costs.

E. Debit Overhead - Spinning $2,000

   Debit Overhead - Tufting $1,000

   Credit Factory Insurance $3,000

To record insurance costs.

F. Debit Work-in-Process - Spinning $80,000

   Debit Work-in-Process - Tufting $55,000

   Credit Factory Overhead $135,000

To record overhead costs applied.

G. Debit Work-in-Process - Tufting $547,000

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

To record the transfer to Tufting department.

H. Debit Finished Goods Inventory $807,200

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

To record the transfer to Finished Goods.

I. 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 = $32,300

Materials = $46,500

3. Factory Overhead Accounts:

Overhead - Spinning:

B. Materials (Indirect)      46,000

C. Indirect labor               18,500

D. Depreciation exp.      12,500

E. Factory insurance       2,000

F. Applied overhead                    80,000

Overapplied overhead   1,000

Overhead - Tufting:

B. Materials (Indirect)      39,500

C. Indirect labor                9,000

D. Depreciation exp.        8,500

E. Insurance expense      1,000

F. Applied overhead                  55,000

Underapplied overhead             3,000

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

Beginning balance            $62,000

Work-in-Process-Tufting   807,200

Cost of Goods Sold                          $795,200

Ending balance                                     74,000

Work-in-Process - Spinning

Account Titles                   Debit      Credit

Beginning balance        $35,000

B. Materials                    275,000

C. Direct labor               185,000

F. Applied overhead      80,000

G. Work-in-Process -Tufting        $547,000

Ending balance                                28,000    

Work-in-Process - Tufting

Account Titles                   Debit      Credit

Beginning balance        $28,500

B. Carpet backing           110,000

C. Direct labor                 98,000

E. Insurance expense        1,000

F. Applied overhead      55,000

G. WIP- Spinning          547,000

H. Finished Goods                        $807,200

Ending balance                                 32,300

Cost of Goods Sold

I. Finished Goods    $795,200

Materials

Account Titles                   Debit       Credit

Beginning balance         $17,000

A. Accounts receivable  500,000

B. Work-in-Process - Spinning           $275,000

B. Work-in-Process - Spinning               46,000

B. Work-in-Process - Tufting                  39,500

B. Work-in-Process - Tufting                 110,000

Ending balance                                      46,500

answer; is the sum of all individual demands curves;

answer makes less frequent trips to the bank and firms make less frequent price changes;