At end of the year, a company has a $1,200 debit balance in Manufacturing Overhe

Question

At end of the year, a company has a $1,200 debit balance in Manufacturing Overhead. The company: makes an adjusting entry by debiting Manufacturing Overhead Applied for $1,200 and crediting Manufacturing Overhead for $1,200. makes an adjusting entry by debiting Manufacturing Overhead Expense for $1,200 and crediting Manufacturing Overhead for $1,200. makes an adjusting entry by debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Overhead for $1,200. makes no adjusting entry because differences between actual overhead and the amount applied are a normal part of job order costing and will average out over the next year.

Explanation / Answer

Debit Balance of manufacturing overhead account means manufacturing overhead has been underapplied to the Work in process account. To adjust the cost of goods sold the adjusting entry should be passed by debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Overhead for $1,200

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