Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the firm's size. The year-end journal entry to record this amount would include:
A) a debit to Cost of Goods Sold.
B) a debit to Manufacturing Overhead.
C) a debit to Work-in-Process Inventory.
D) a credit to Cost of Goods Sold.
E) a credit to Work-in-Process Inventory.

Question

Quizplus · Accepted Answer

Underapplied overhead means actual overhead costs were higher than applied costs. To close this, Cost of Goods Sold is debited to increase expenses, reflecting the additional overhead costs.

Howard Manufacturing's Overhead at Year-End Was Underapplied by $5,800, a Small