Investigation shows that on the basis of the month's payroll we have incurred a premium expense for lia bility insurance of $390.46, which we insert in the ad justments column (see working page 387) also in the adjustments-credit column opposite "ac crued liability insurance payable." In like manner, we find omission of Parker's monthly salary of $200 as production manager, which we insert opposite "salaries—foundry office," of Webb's monthly salary of $175 as sales manager, which we insert opposite "salaries—sales office" and of Anderson's salary of $150 as chief accountant, which we insert opposite "salaries—general office." Their total of $525, we insert opposite "accrued payroll" in the adjustments-credit column.
In like manner, we make insertions for accrued interest on bonds, estimated lighting expense and ac crued taxes for July. The insertions are made in the adjustments-debit column as expenses or shares of in come and in the adjustments-credit column as liabili ties.
We also make allowances for depreciation and re pairs, on a basis with which the reader will not be wearied, as follows: depreciation of iron foundry ap paratus $1,596.20, of brass foundry, $51.50, of aluminum foundry $2, of miscellaneous products $10.42, of cupola $87.92, of welding apparatus $29.22, of pattern shop apparatus $86.46, of air blast ap paratus $17.14—total for all apparatus $2,003.06; de preciation of building $123.46, of foundry office equip ment $5, of sales office equipment, $8.73, of general office equipment $6—total for all depreciations $19.73. These we insert in one section as debits or expenses, in the other as credits or reserves for depreci ation.
Besides those accounts which naturally contribute their balances to the assets column we find: Unex pired fire insurance $164.80, postage stamps in the sales office $5, postage stamps in the general office $8, and $3.57 of unexpired cash discounts offered us on purchase invoices, all of which we insert in the as sets and economic-summary column.
15. Stores records.—A record of production kept in the foundry office shows the following: From this record, in conjunction with the beginning inventories of materials and the record of purchases and record of issuance of stationery and supplies, ($54.40 to the foundry office, $20 to the sales office and $20 to the general office) we ascertain a stores inventory costing $20,164.09, and total stores con
sumption costing $16,246.46. Accordingly we dis tribute the stores balance between "assets" and "ex pense." The valuation of the finished goods inven tory, we can get only when our compilation of costs is complete.
Having made our insertions for adjustments and inventories, we bring everything in the trial balance over into the economic-summary and balance sheet columns. In what follows, the reader should keep the expense distribution sheet constantly before him.
16. Distribution of expenses.—Next, we proceed to distribute the "expenses," among the various ex pense classes indicated by the columnar headings to the right. Most of these indicate their assignment by their names. The record of production determines the material distribution. On the basis of values and specific policy premiums, the expired fire insurance is distributed as indicated on that line. On the basis of payroll costs, the liability insurance is distributed as shown on that line.
Depreciation of building and taxes on land and buildings are assigned to building expense. This is totaled and the total, $213.26, is distributed on the basis of floor-space occupied to cupola, pattern, and so on as indicated to the right.
General foundry expense aggregates $379.40. This is another "over-head" expense of a supervisory character. We have chosen total labor cost, direct and indirect, as the basis on which to apportion this among the other cost classes. This method illustrates a second basis of distributing "over-head." Power expense aggregates $439.24. It is appor tinned on the basis of power used, 40 per cent to air expense, 27.5 per cent to cupola and 32.5 per cent to welding.
Air expense now shows a total of $193.64, which, since the air blast is used altogether in making molds for iron castings, is assigned to iron castings.
The cupola cost complete shows a total cost of $13, 048.72 for molten metal poured into molds for iron castings. This, however, is the net after deducting the material cost assigned to "gates and sprue" and defective castings, which, except for the 6,424 lbs.
used in making miscellaneous products, went back into the inventory of iron scrap. Only the net material cost was inserted in this column. The total of cupola cost is transferred to iron castings.