Question

The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances:

Raw Materials	$20,000
Work in Process	$40,000
Finished Goods	$10,000
Cost of Goods Sold	$50,000

If Manufacturing overhead was $12,000 underapplied and considered material, what is the journal entry?

a.

Manufacturing Overhead$12,000

Work in Process$4,800

Finished Goods$1,200

Cost of Goods Sold$6,000

b.

Work in Process$4,800

Finished Goods$1,200

Cost of Goods Sold$6,000

Manufacturing Overhead$12,000

c.

Manufacturing Overhead$12,000

Raw Materials$2,000

Work in Process$4,000

Finished Goods$1,000

Cost of Goods Sold$5,000

d.

Cost of Goods Sold$12,000

Manufacturing Overhead$12,000

e.

Raw Materials$2,000

Work in Process$4,000

Finished Goods$1,000

Cost of Goods Sold$5,000

Manufacturing Overhead$12,000

Answer 1

Correct answer---(b)

Correct journal entry would be as follows

Work in process	$        4,800.00
Finished goods	$        1,200.00
Cost of goods sold	$        6,000.00
Manufacturing overheads		$ 12,000.00

Working

	Unadjusted balances	Allocation of Underapplied overheads (12000)
Work in process	$      40,000.00	$    4,800.00	(12000/100000 x 40000)
Finished goods	$      10,000.00	$    1,200.00	(12000/100000 x 10000)
Cost of goods sold	$      50,000.00	$    6,000.00	(12000/100000 x 50000)
	$ 1,00,000.00