Sharp Company's records show that overhead was overapplied by $10,000 last year.This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year.In trying to determine why overhead was overapplied by such a large amount,the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error.Given the above information,which of the following statements is true?
A) Manufacturing overhead was actually overapplied by $16,000 for the year.
B) The company's net income is understated by $6,000 for the year.
C) Under the circumstances posed above,the error in recording depreciation would have no effect on net income for the year.
D) The amount of $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

Question

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The Answer of Sharp Company's records show that overhead was overapplied by $10,000 last year.This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year.In trying to determine why overhead was overapplied by such a large amount,the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error.Given the above information,which of the following statements is true?
A) Manufacturing overhead was actually overapplied by $16,000 for the year.
B) The company's net income is understated by $6,000 for the year.
C) Under the circumstances posed above,the error in recording depreciation would have no effect on net income for the year.
D) The amount of $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

Sharp Company's Records Show That Overhead Was Overapplied by $10,000