M.A.E. 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, M.A.E. Company's Factory Overhead account has a credit balance of $5,000, which is not a material amount. What entry should M.A.E. make at year-end?

Question

Quizplus · Accepted Answer

M.A.E. should transfer the credit balance in the Factory Overhead account to Cost of Goods Sold, since overhead is a period cost and should be expensed in the same period as the related revenue. Choice B shows the correct entry to transfer the credit balance of $5,000 to Cost of Goods Sold, which will increase expenses and decrease net income. The other choices either do not address the credit balance or they do not correctly account for the overhead charged to jobs during the year.

MA Charged