At the end of the year,Metro,Inc.has an unadjusted credit balance in the Manufacturing Overhead account of $890.Which of the following is the year-end adjusting entry needed to adjust the account?

Question

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The unadjusted credit balance in the Manufacturing Overhead account means that there were more overhead costs allocated to production than were actually incurred during the year. To adjust this, we need to debit the account for the amount of the overallocation ($890) and credit an account that will reduce the total manufacturing costs for the year. This account is Cost of Goods Sold, so the adjusting entry should be a debit to Manufacturing Overhead of $890 and a credit to Cost of Goods Sold of $890. Option A is incorrect because a credit to Finished Goods Inventory would not decrease the total manufacturing costs for the year. Option B is incorrect because a debit to Finished Goods Inventory would not reduce the overallocation in the Manufacturing Overhead account. Option D is incorrect because a debit to Cost of Goods Sold would increase the total manufacturing costs for the year, which is not what we want in this situation.

At the End of the Year,Metro,Inc