Marshall Enterprises charged the following amounts of overhead to jobs during the year: $20,000 to jobs still in process, $60,000 to jobs completed but not sold, and $120,000 to jobs finished and sold. At year-end, Marshall Enterprise's Factory Overhead account has a credit balance of $5,000, which is not a material amount. What entry should Marshall make at year-end?

Question

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Since the Factory Overhead account has a credit balance of $5,000, it means that overhead was overapplied during the year. To adjust for this, Marshall should debit Factory Overhead for $5,000 and credit Cost of Goods Sold for $5,000 to reduce the credit balance in the Factory Overhead account and recognize the overapplied overhead as a cost of goods sold. Option A is incorrect because it would increase the cost of goods sold by $5,000 without reducing the credit balance in the Factory Overhead account. Option C is incorrect because no adjustment is needed. Option D is incorrect because the $5,000 credit balance in the Factory Overhead account does not relate to finished goods inventory. Option E is incorrect because the $5,000 credit balance in the Factory Overhead account does not relate to work in process inventory.

Marshall Enterprises Charged the Following Amounts of Overhead to Jobs