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

Accounting May 21, 2021

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.

Expert Solution

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.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote