At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?
A) overapplied, deferred credit
B) underapplied, deferred debit
C) underapplied, deferred credit
D) overapplied, deferred debit

Question

Quizplus · Accepted Answer

The debit balance in the factory overhead account indicates that the actual overhead costs were higher than the overhead costs applied to production, meaning it is underapplied. This underapplied overhead is reported as a deferred debit on the interim balance sheet, as it represents an expense that will need to be allocated in the future.

At the End of July, the First Month of the Current