Help Required information The following information is avail

Help Required information The following information is available for the current year ending December 31 Hanufacturing overhead applied Actual amount of manufacturing overhead costs Amount of overhead applied during the year that is in $ 150,000 120,000 Work in Process Finished Goods Cost of Goods Sold S 37,500 25% 2,50035 60,000 40 Total overhead applied s 150,000 100 Knowledge Check 01 If the Manufacturing Overhead account is closed to Cost of Goods Sold, the related entry will O decrease the cost of goods sold by $30,000 Oincrease the cost of goods sold by $30.000 decrease the cost of goods sold by $150.000 increase the cost of goods sold by S150000 3 5 6 7 9

Solution

Solution:

Actual manufacuring overhead cost incurred = $120,000

Manufacturing overhead applied = $150,000

Overapplied manufacturing overhead = $150,000 - $120,000 = $30,000

1. If manufacturing overhead account is closed to cost of goods sold then overapplied overhead will be transferred to COGS, thus manufacturing overhead will be debited by $30,000 and COGS will be credited by $30,000. Thus resulting in to decrease in cost of goods sold by $30,000.

2.If manufacturing overhead account is closed proportionally to WIP, finished goods and COGS then overapplied overhead will be transferred to WIP, finished goods and COGS in the proporation of their applied rate.

Therefore Required Journal Entry:

Manufacturing Overhead A/c Dr $30,000

To WIP A/c $7,500

To Finished Goods A/c $10,500

To Cost of goods sold $12,000

Therefore related entry will include a credit to cost of goods sold for $12,000.