Seuell Inc.has provided the following data for the month of December.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 $12,000.
The Corporation allocates any underapplied or overapplied manufacturing overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the manufacturing overhead applied during the month in those accounts.
The journal entry to record the allocation of any underapplied or overapplied manufacturing overhead for December would include the following:
A) debit to Finished Goods of $56,160
B) credit to Finished Goods of $56,160
C) debit to Finished Goods of $2,520
D) credit to Finished Goods of $2,520

Question

Seuell Inc.has provided the following data for the month of December.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 $12,000.
The Corporation allocates any underapplied or overapplied manufacturing overhead among work in process,finished goods,and cost of goods sold at the end of the month on the basis of the manufacturing overhead applied during the month in those accounts.
The journal entry to record the allocation of any underapplied or overapplied manufacturing overhead for December would include the following:
A) debit to Finished Goods of $56,160 
B) credit to Finished Goods of $56,160 
C) debit to Finished Goods of $2,520 
D) credit to Finished Goods of $2,520

Quizplus · Accepted Answer

Allocating overapplied manufacturing overhead decreases the balances in the inventory and cost of goods sold accounts, resulting in credits to those accounts.
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