At the end of the year,Metro,Inc.has an unadjusted credit balance in the Manufacturing Overhead account of $820.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 indicates that overhead costs have been overallocated. Therefore, the account needs to be adjusted with a debit entry to decrease the credit balance. The adjusting entry should credit the Cost of Goods Sold account because the overallocated overhead costs need to be recognized as expenses in the current period. So, the correct adjusting entry is a debit to Manufacturing Overhead of $820 and a credit to Cost of Goods Sold of $820. Option C is the only choice that correctly reflects this adjusting entry.

At the End of the Year,Metro,Inc