Question

A company incurs factory overhead costs of $1,200 and applied $1,500. If the difference is considered immaterial, then the:_______

a) adjusting entry will require a debit to Cost of Goods Sold.
b) adjusting entry will require a credit to Cost of Goods Sold.
c) Factory Overhead account has a credit balance of $300 before adjusting.
d) Factory Overhead account has a debit balance of $300 before adjusting.

Answer 1

b) adjusting entry will require a credit to Cost of Goods Sold.

c) Factory Overhead account has a credit balance of $300 before adjusting.

Explanation:

Given that

Actual Overhead = $1200 i.e. debited to the factory overhead account

And,

Applied overhead = $1500 i.e. Credited to the factory overhead account

So, the Factory overhead account has a credit balance of $300 prior adjusting

Also the applied overhead is higher than the actual one so the adjusting entry would needed to credit to the cost of goods sold