During the current accounting period, O'Hare applied $14,500 of estimated overhead cost to production. Actual overhead costs were $14,325. Assuming that the balance in the Manufacturing Overhead is insignificant, the recognition of the transaction to close that account will: This makes the explanation much easier
A)Decrease cost of goods sold and increase stockholder's equity.
B)Increase cost of goods sold.
C)Decrease stockholder's equity.
D)Decrease total assets and total liabilities. This makes the explanation much easier

Question

Quizplus · Accepted Answer

Since the actual overhead costs were less than the estimated overhead cost applied to production, there will be a decrease in the cost of goods sold and an increase in stockholder's equity when recognizing the transaction to close the Manufacturing Overhead account. This is because the difference between the applied overhead cost and the actual overhead cost will be credited back to the Manufacturing Overhead account and transferred to the Cost of Goods Sold account, reducing the cost of goods sold, and increasing stockholder's equity.

During the Current Accounting Period, O'Hare Applied $14,500 of Estimated