Question

The Sterling Company applies manufacturing overhead. At the end of the year the following data were available: Actual Manufacturing Overhead $115,000 Estimated Manufacturing Overhead $110,000 Applied Manufacturing Overhead $100,000 The following accounts had the unadjusted balances: Raw Materials Inventory $100,000 Work-in-Process Inventory $100,000 Finished Goods Inventory $100,000 Cost of Goods Sold $300,000 What is the journal entry if the amount is considered material?

Answer 1

Work-in-process: $3,000

Finished Goods: $3,000

Cost of Goods Sold: $9,000

Manufacturing Overhead: $15,000

Step-by-step explanation:

Under applied Manufacturing Overheads = Actual Manufacturing Overheads - Applied Manufacturing Overheads

= $115,000 - $100,000

= $15,000

This Under applied overheads will be allocated in proportion to un-adjusted balances of Work In Process ; Finished Goods; Cost of Goods Sold

The proportion will be $100,000:$100,000:$300,000 = 1:1:3

Therefore,

Amount Applied to Work In Process Inventory =
`15,000*(1)/(5) =` $3,000

Amount Applied to Finished Goods Inventory =
`15,000*(1)/(5) =` $3,000

Amount Applied to Cost of Goods Sold =
`15,000*(3)/(5) =` $9,000

Total = 3,000 + 3,000 + 9,000 = $15,000

Answer 2

Step-by-step explanation:

Adjusting entry for under applied manufacturing overhead

Dr Work in process $3000

Dr Finished goods $3000

Dr Cost of goods sold $9000

Cr Manufacturing overhead $15,000

Step-by-step explanation:

Under applied manufacturing overhead = Manufacturing overhead - Applied manufacturing overhead = 115,000 - 100,000 = $15,000

Under applied manufacturing overhead should be applied in proportion to unadjusted balances of Work in process, Finished goods, Cost of goods sold, which is $100,000, $100,000, $300,000 or 1:1:3 ⇒ $3000, $3000, $9000