COST ACCOUNTING
JOB ORDER COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Debit Manufacturing OverheadCredit Cost of Goods Sold
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Debit Cost of Goods SoldCredit Manufacturing Overhead
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Debit Manufacturing OverheadCredit work-in-process accounts
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Debit work-in-process accountsCredit Manufacturing Overhead
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Detailed explanation-1: -When overhead has been overapplied, the proper accounting is to debit the manufacturing overhead cost pool and credit the cost of goods sold in the amount of the overapplication. Doing so results in the actual amount of overhead incurred being charged through the cost of goods sold.
Detailed explanation-2: -If overhead is overapplied, it means hat the credit is bigger than the sum of the debits, so the balance (that must be zeroed in the adjusting entry), is a CREDIT. The adjusting entry at the end of the year will show a debit to the Factory Overhead account and a credit to the Cost of Goods Sold account.
Detailed explanation-3: -The adjustment made for overhead that is over-applied is that the extra amount that is charged to COGS will be reduced by making an adjustment entry.
Detailed explanation-4: -Close the Manufacturing Overhead Account If the amount is inconsequential, then the balance is closed directly to the cost of goods sold account. If the amount is material, the amount is allocated between the work in process, finished goods and the cost of goods sold accounts.