At the current year-end, Simply Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Simply should:
A) Close the $2,500 to Finished Goods Inventory.
B) Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
C) Carry the $2,500 to the income statement as "Other Expense".
D) Carry the $2,500 to the next period.
E) Close the $2,500 to Cost of Goods Sold.

Question

Quizplus · Accepted Answer

When overhead is underapplied and the amount is not material, it is typically closed to Cost of Goods Sold to adjust the expense for the period.

At the Current Year-End, Simply Company Found That Its Overhead