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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for process cost system

Pori Ormond Carpel 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 carpel hacking is added al 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:

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 Department 46,000
Indirect materials—Tufting Department 39,500
c. Labor used  
Direct labor—Spinning Department $185,000
Direct labor—Tufting Department 98,000
Indirect labor—Spanning 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)(a)

To determine

Work in process costs

It is the cost of production process that is used to manufacture partly completed products. It comprises the cost of raw materials, labor, and overhead that incurred for the production process of the products at various phases.

Direct materials cost

Manufacturing products arise with raw materials that are altered into finished products. The cost of any material that is an important part of the finished product is categorized as a direct materials cost.

Conversion cost

Cost of changing the materials into a finished product. It includes direct labor costs and factory overhead costs.

To Prepare: The journal entry to record material purchased on account of Company POC.

Explanation

Prepare the journal entry to record material purchased on account of Company POC as shown below:

Account title and Explanation Debit Credit
Materials $500,000
 Accounts payable

(1)(b)

To determine

To Prepare: The journal entry to record material requisition used for production of Company POC.

(1)(c)

To determine

To Prepare: The journal entry to record labor used for production of Company POC.

(1-d)

To determine

To Prepare: The journal entry to record accumulated depreciation on fixed asset of Company POC.

(1-e)

To determine

To Prepare: The journal entry to record expired prepaid factory insurance of Company POC.

(1-f)

To determine

To Prepare: The journal entry to record applied factory overhead of Company POC.

(1-g)

To determine

To Prepare: The journal entry to record production costs transferred from spinning department to tufting department of Company POC.

(1-h)

To determine

To Prepare: The journal entry to record production costs transferred from tufting department to finished goods of Company POC as shown below:

(1-i)

To determine

To Prepare: The journal entry to record cost of goods sold during the period of Company POC.

(2)

To determine

To Compute: The ending balance of inventory accounts of Company POC.

(3)

To determine

To Compute: The ending balance of factory overhead accounts of Company POC.

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