Question

Assume that the company allocates any underapplied or overapplied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. These amounts are $90,336 for work in process, $316,176 for finished goods, and $722,688 for cost of goods sold. Prepare the journal entry to show the allocation for the year.

Answer 1

Journal entry to show the allocation of under applied or over applied overhead for the year:

It is given that the company allocates any under applied or over applied overhead to work in process, finished goods, and cost of goods sold on the basis of the amount of overhead applied during the year that remains in each account at the end of the year. The amounts are given $90,336 for work in process, $316,176 for finished goods, and $722,688 for cost of goods sold. Assuming that these amounts are under applied overhead, and then the Journal entry to record the allocation of under applied overhead for the year shall be as follows:

Work in Process inventory Debit $90,336

Finished Goods Inventory Debit $316,176

Cost of Goods Sold Debit $ 722,688

Manufacturing Overhead Credit $ 1,129,200

(Being under applied overhead adjusted)