At the end of the year,Jenkins Corporation had $120,000 in the Factory Overhead account and applied factory overhead of $100,000.Mark Gibbs,the controller,has decided that the difference is to large to close to Cost of Goods Sold.Work in process inventories were $30,000,finished goods inventories were $60,000 and cost of goods sold during the year was $210,000.How should the entry to dispose of the difference in overhead incurred and overhead applied affect Cost of Goods Sold?
A)$14,000 credit.
B)$14,000 debit.
C)$6,000 credit.
D)20,000 debit.

Question

Quizplus · Accepted Answer

To dispose of the difference in overhead incurred and overhead applied, a journal entry should be made as follows:

Factory Overhead (Actual) $120,000
Factory Overhead (Applied) $100,000
Cost of Goods Sold $20,000 (debit)

The difference of $20,000 (actual overhead - applied overhead) is debited to Cost of Goods Sold. Therefore, the answer is B, a $14,000 debit to Cost of Goods Sold is needed to record the balance of $20,000 as an expense.

At the End of the Year,Jenkins Corporation Had $120,000 in the Factory