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Homework answers / question archive / The journal entry to dispose of overapplied or underapplied overhead, if overhead is applied based on direct labor hours, would include a credit to: A
The journal entry to dispose of overapplied or underapplied overhead, if overhead is applied based on direct labor hours, would include a credit to:
A. Work-in-Process Inventory. B. Cost of Goods Sold. C. Finished Goods Inventory. D. Factory Overhead Control. E. Materials Inventory.
Answer
B .
Explanation
The correct option is B "Cost of Goods Sold".
| Journal Entries: | |||
| When Overhead is Under-applied: | |||
| Date | Account Titles | Debit | Credit |
| Cost of Goods Sold | XXX | ||
| Manufacturing Overhead | XXX | ||
| When Overhead is Over-applied: | |||
| Date | Account Titles | Debit | Credit |
| Manufacturing Overhead | XXX | ||
| Cost of Goods Sold | XXX | ||
Under this method the entire amount of over or under applied overhead is transferred to cost of goods sold.
