The Marina Corp. has applied overhead to jobs during the period as follows: The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:

Question

The Marina Corp. has applied overhead to jobs during the period as follows:  The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:

Quizplus · Accepted Answer

The credit balance in the Factory Overhead account indicates that the overhead has been overapplied. To dispose of this balance, the amount should be transferred to Cost of Goods Sold through a closing entry. Option B correctly records the entry by debiting Factory Overhead $5,600 and crediting Cost of Goods Sold $5,600. Option A and C are incorrect since Work in Process Inventory should not be affected at this point. Option D is incorrect since the overapplied overhead balance is in the Factory Overhead account, not Work in Process Inventory. Option E is incorrect since an entry is needed to close out the overapplied overhead balance.