Question

The application of overhead has resulted in a $5,600 credit balance in the factory overhead account, and this amount is not material. the entry to dispose of this remaining factory overhead balance is: select one:

a. debit cost of goods sold $5,600; credit factory overhead $5,600.
b. debit factory overhead $5,600; credit cost of goods sold $5,600.
c. debit factory overhead $5,600; credit work in process inventory $5,600.
d. debit work in process inventory $5,600; credit factory overhead $5,600.
e. no entry is needed.

Answer 1

when manufacturing overhead has a credit balance, overhead is overapplied. Overapplied overhead means that the overhead assigned to work in process is greater than the overhead incurred. Also, since the amount is immaterial, it should be closed in cost of goods sold.

The adjusting entry for the overapplied over-head is:

b. debit factory overhead $5,600; credit cost of goods sold $5,600.

After posting this entry the factory overhead account will have a zero balance.

Hope it helps!