Question

1. The entry to dispose of overapplied manufacturing overhead will include a:

   	a.	Debit to cost of goods sold and a credit to manufacturing overhead.
   	b.	Debit to cost of goods sold and a credit to finished goods.
   	c.	Debit to manufacturing overhead and a credit to cost of goods sold.
   	d.	Debit to finished goods and a credit to manufacturing overhead.

Answer 1

Answer:c. Debit to manufacturing overhead and a credit to cost of goods sold.

The actual costs are recorded through a debit to manufacturing overhead .If the manufacturing overhead has a credit balance , the overhead is overapplied and the resulting amount of goods is overstated .The entry passed would be:

Manufacturing Overhead a/c                     Dr.

       To Cost of goods sold