Which of the following statements about under- or overapplied manufacturing overhead is correct?
A) After the entry to transfer over- or underapplied overhead to Cost of Goods Sold is posted Manufacturing Overhead will have a zero balance.
B) When Manufacturing Overhead has a credit balance overhead is said to be under-applied.
C) At the end of the year under- or overapplied overhead is eliminated by a closing entry.
D) When annual financial statements are prepared overapplied overhead is reported in current liabilities.

Question

Quizplus · Accepted Answer

After the entry to transfer over- or underapplied overhead to Cost of Goods Sold is posted, Manufacturing Overhead will have a zero balance. This is because the over or underapplied amount is transferred to Cost of Goods Sold as an adjustment.

Which of the Following Statements About Under- or Overapplied Manufacturing