Alvernaz Inc. has provided the following data for the month of April. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Manufacturing overhead for the month was overapplied by $2,000.
The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
-The journal entry to record the allocation of any underapplied or overapplied overhead for April would include the following:
A) credit to Cost of Goods Sold of $1,240
B) credit to Cost of Goods Sold of $106,810
C) debit to Cost of Goods Sold of $106,810
D) debit to Cost of Goods Sold of $1,240

Question

Alvernaz Inc. has provided the following data for the month of April. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.  Manufacturing overhead for the month was overapplied by $2,000.
The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
-The journal entry to record the allocation of any underapplied or overapplied overhead for April would include the following:
A) credit to Cost of Goods Sold of $1,240 
B) credit to Cost of Goods Sold of $106,810 
C) debit to Cost of Goods Sold of $106,810 
D) debit to Cost of Goods Sold of $1,240

Quizplus · Accepted Answer

The correct answer is A because the journal entry to record the allocation of any underapplied or overapplied overhead for April would include a credit to Cost of Goods Sold of $1,240.