Question

A company’s Factory Overhead account shows total debits of $632,000 and total credits of $696,000 at the end of the year.
Determine whether there is over- or underapplied overhead using the T-account below.
  

Prepare the journal entry to close the balance in the Factory Overhead account to Cost of Goods Sold.

Answer 1

Solution

General Journal	Debit	Credit
Manufacturing overhead	$      64,000.00
Cost of goods sold		$      64,000.00
(To record allocation of Overapplied overheads)

Working

Overhead T Account
Actual overhead	$    632,000.00	Applied overhead	$ 696,000.00
Overhead Overapplied	$      64,000.00

Overhead Overapplied reduce cost of goods sold.