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 $8,300
Work in Process-Spinning Department 2,000
Work in Process-Tufting Department 2,600
Materials 4,800

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, $82,000
2 Materials requisitioned for use:
Fiber-Spinning Department, $42,600
Carpet backing-Tufting Department, $34,700
Indirect materials-Spinning Department, $3,300
Indirect materials-Tufting Department, $2,900
31 Labor used:
Direct labor-Spinning Department, $26,300
Direct labor-Tufting Department, $17,200
Indirect labor-Spinning Department, $12,500
Indirect labor-Tufting Department, $11,900
31 Depreciation charged on fixed assets:
Spinning Department, $5,300
Tufting Department, $3,100
31 Expired prepaid factory insurance:
Spinning Department, $1,000
Tufting Department, $800
31 Applied factory overhead:
Spinning Department, $22,400
Tufting Department, $18,250
31 Production costs transferred from Spinning Department to Tufting Department, $90,000
31 Production costs transferred from Tufting Department to Finished Goods, $153,200
31 Cost of goods sold during the period, $158,000

Required:
a. Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations.
b. Compute the January 31 balances of the inventory accounts.
c. Compute the January 31 balances of the factory overhead accounts.

Port Ormond Carpet Company

1. Journal Entries:

Jan. 1:

Debit Materials $82,000

Credit Accounts payable $82,000

To record the purchase of materials on account.

Jan. 2:

Debit Work-in-Process - Spinning $42,600

Credit Materials $42,600

To record the materials requisitioned.

Jan. 2:

Debit Work-in-Process -Tufting $34,700

Credit Materials $34,700

To record carpet backing

Jan. 2:

Debit Overhead - Spinning $3,300

Debit Overhead - Tufting $2,900

Credit Materials $6,200

To record indirect materials used.

Jan. 31:

Debit Work-in-Process - Spinning $26,300

Debit Work-in-Process - Tufting $17,200

Credit Factory labor $43,500

To record direct labor costs.

Jan. 31:

Debit Overhead - Spinning $12,500

Debit Overhead - Tufting $11,900

Credit Factory labor $24,400

To record indirect labor costs.

Jan. 31:

Debit Overhead - Spinning $5,300

Debit Overhead - Tufting $3,100

Credit Factory Depreciation $8,400

To record depreciation costs.

Jan. 31:

Debit Overhead - Spinning $1,000

Debit Overhead - Tufting $800

Credit Factory Insurance $1,800

To record insurance costs.

Jan. 31:

Debit Work-in-Process - Spinning $22,400

Debit Work-in-Process - Tufting $18,250

Credit Factory Overhead $40,650

To record overhead costs applied.

Jan. 31:

Debit Work-in-Process - Tufting $90,000

Credit Work-in-Process - Spinning $90,000

To record the transfer to Tufting department.

Debit Finished Goods Inventory $153,200

Credit Work-in-Process- Tufting $153,200

To record the transfer to Finished Goods.

Jan. 31:

Debit Cost of Goods Sold $158,000

Credit Finished Goods $158,000

To record the cost of goods sold.

2. January 31 balances of the inventory accounts:

Finished Goods = $3,500

Work-in-Process - Spinning = $3,300

Work-in-Process - Tufting = $9,550

Materials = $600

3. Factory Overhead Accounts- Spinning:

Account Titles                   Debit      Credit

Jan. 31 Materials (Indirect)  3,300

Indirect labor                     12,500

Depreciation exp.               5,300

Factory insurance               1,000

Applied overhead                         22,400

Overapplied overhead         300

Factory Overhead Accounts- Tufting:

Account Titles                   Debit      Credit

Materials (Indirect)          $2,900

Indirect labor                    11,900

Depreciation expenses    3,100

Insurance expense             800

Applied overhead  -WIP-Tufting       18,250

Underapplied overhead                       450

Explanation:

a) Data and Calculations:

January 1 Inventories:

Finished Goods = $3,500

Work in Process- Spinning = $2,000

Work in Process - Tufting = $2,600

Materials = $4,800

Finished Goods

Account Titles                      Debit      Credit

Beginning balance             $8,300

Work-in-Process-Tufting  153,200

Cost of Goods Sold                          $158,000

Ending balance                                      3,500

Work-in-Process - Spinning

Account Titles                   Debit      Credit

Beginning balance        $2,000

Materials                        42,600

Direct labor                    26,300

Applied overhead         22,400

Work-in-Process -Tufting        $90,000

Ending balance                            3,300        

Work-in-Process - Tufting

Account Titles                   Debit      Credit

Beginning balance        $2,600

Carpet backing              34,700

Direct labor                     17,200

 Applied overhead          18,250

WIP- Spinning               90,000

Finished Goods                        $153,200

Ending balance                              9,550

Cost of Goods Sold

Finished Goods    $158,000

Materials

Account Titles                   Debit       Credit

Beginning balance          $4,800

Accounts payable           82,000

Work-in-Process - Spinning            $42,600

Work-in-Process - Tufting                 37,400

Manufacturing overhead- Spinning   3,300

Manufacturing overhead- Tufting     2,900

Ending balance                                     600

due to the changes the federal reserve is making the unused reserves will impact the economy by them facing inflation. inflation is definfed as the increase in pricing of a good or service but the decline of the value of money used for purchasing those items. when the economy has a high inflation rate, they are subject to money loss and hurt on the economy.