Question

A proper journal entry to close overapplied manufacturing overhead to Cost of Goods Sold would be:

1) Cost of Goods Sold xxx
Work in Process xxx
2) Cost of Goods sold xxx
Manufacturing Overhead xxx
3) Cost of goods Sold xxx
Finished Goods xxx
4) Manufacturing Overhead xxx
Cost of goods Sold xxx

Answer 1

The correct journal entry to close overapplied manufacturing overhead to Cost of Goods Sold is to credit Manufacturing Overhead and debit Cost of Goods Sold.

Step-by-step explanation:

The question pertains to the journal entry required to close overapplied manufacturing overhead to Cost of Goods Sold (COGS). When manufacturing overhead is overapplied, it means the estimated overhead costs exceed the actual costs incurred. To adjust for this in accounting records, the overapplied amount should be credited to Manufacturing Overhead and debited to COGS, which decreases the COGS. Therefore, the correct option for this closing entry is:

4) Manufacturing Overhead xxx
Cost of goods Sold xxx