Final answer:
The correct adjustment for overapplied manufacturing overhead is to debit Cost of Goods Sold and credit Manufacturing Overhead, thereby aligning the recorded costs with actual expenditures.
Step-by-step explanation:
The correct way to adjust overapplied manufacturing overhead is to debit Cost of Goods Sold, and credit Manufacturing Overhead. When manufacturing overhead is overapplied, it means that the overhead assigned to products is more than the actual overhead incurred. This requires an adjustment at the end of the period to balance the accounts. The entry effectively reduces the Cost of Goods Sold and eliminates the balance in the Manufacturing Overhead account, as it is assumed that the overhead was initially applied to expenses too liberally.
The correct way to adjust overapplied manufacturing overhead is:
b) Debit Manufacturing Overhead, credit Cost of Goods Sold
When manufacturing overhead is overapplied, it means that too much overhead has been assigned to the products being produced. To correct this, the overapplied amount is adjusted by debiting the Manufacturing Overhead account and crediting the Cost of Goods Sold account. This reduces the amount of overapplied overhead and recognizes it as a cost in the income statement.