During 2014the current accounting period,O'Hare applied $14,500 of estimated overhead cost to production.Actual overhead costs were $14,325.Assuming that the balance in the Manufacturing Overhead is insignificant,tThe recognition of these transactions to close that account will: This makes the explanation much easier
A) Decrease cost of goods sold and increase stockholder's equity.
B) Increase cost of goods sold.
C) Decrease stockholder's equity.
D) Decrease total assets and total liabilities.
This makes the explanation much easier

Question

Quizplus · Accepted Answer

Overhead is overapplied.The debits in the Manufacturing Overhead account (for the actual overhead costs)of $14,325 are less than the credits (for the amount applied)of $14,500 and,as a result,the Manufacturing Overhead account would have a credit balance.
When overhead is overapplied,actual overhead was lower than applied overhead (which is the amount of overhead that is included in work in process).The entry to close the account will debit the temporary asset account Manufacturing Overhead (to offset the existing credit balance)and credit (or decrease)the expense account Cost of Goods Sold.The decrease in this increases net income,which increases stockholders;equity (Retained Earnings).

During 2014the Current Accounting Period,O'Hare Applied $14,500 of Estimated Overhead