Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Textbook Question
Chapter 4, Problem 18P
Phillips Products, Inc. had a remaining credit balance of $10,000 in its under- and overapplied factory
Required:
- 1. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is not considered to be material.
- 2. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is considered to be material.
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Problem 4-30
Coronado, Inc. manufactures ergonomically designed computer furniture.
Coronado uses a job order costing system. On November 30, the Work in
Process Inventory consisted of the following jobs:
Job No.
Item
Units
Accumulated Cost
CC723
Computer caddy
25,000
$970,000
CH291
Chair
18,000
432,000
PS812
Printer stand
25,000
251,000
$1,653,000
On November 30, Coronado's Raw Materials Inventory account totaled
$679,000, and its Finished Goods Inventory totaled $3,495,400.
Coronado applies manufacturing overhead on the basis of machine hours.
The company's manufacturing overhead budget for the year totaled
$4,600,000, and the company planned to use 920,000 machine hours
during the year. Through the first eleven months of the year, the company
used a total of 836,000 machine hours, total manufacturing overhead
amounted to $4,284,500, and Cost of Goods Sold was $4,294,500.
Coronado purchased $8,750,250 in raw materials in December and
incurred…
The Mystic Manufacturing Company's Factory Overhead T-account at the end of the fiscal
year shows Actual Overhead in the amount of $450,000 and Allocated Overhead in the
amount of $480,000.
REQUIRED: Which of the following is true in describing this Accounting scenario?
A) Overhead is under-applied by $30,000 and the journal entry to close out MOH would require
debiting Cost of Goods Sold (COGS)
B) Overhead is under-applied by $30,000 and the journal entry to close out MOH would require
crediting Cost of Goods Sold (COGS).
C) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require
debiting Cost of Goods Sold (COGS).
D) Overhead is over-applied by $30,000 and the journal entry to close out MOH would require
crediting Cost of Goods Sold (COGS).
Lakeshore Company allocates overhead using direct labour-hours. For 2020, the estimated and actual labour-hours were 182,000 and 168,000 respectively, and the predetermined overhead rate used to apply overhead for the year was $24.40 per direct labour-hour. The manufacturing overhead control T-account showed a credit balance of $184,600 at the end of the year, and this balance was disposed of at the end of the year by closing it to cost of goods sold.
Required:
1. Was manufacturing overhead under- or overapplied?
multiple choice 1
Underapplied
Overapplied
2. Compute the actual overhead amount incurred over the year.
Actual Overhead
3. How will end-of-period disposal of this amount impact net income?
multiple choice 2
Increase
Decrease
Chapter 4 Solutions
Principles of Cost Accounting
Ch. 4 - What are factory overhead expenses, and what...Ch. 4 - What are three categories of factory overhead...Ch. 4 - What are the distinguishing characteristics of...Ch. 4 - When a products cost is composed of fixed and...Ch. 4 - What effect does a change in volume have on total...Ch. 4 - Distinguish between a step-variable cost and a...Ch. 4 - What is the basic premise underlying the high-low...Ch. 4 - What are the advantages and disadvantages of the...Ch. 4 - Differentiate between an independent variable and...Ch. 4 - Prob. 10Q
Ch. 4 - What is a flexible budget, and how can management...Ch. 4 - How does accounting for factory overhead differ in...Ch. 4 - What is the function and use of each of the two...Ch. 4 - What are two types of departments found in a...Ch. 4 - What are the two most frequently used methods of...Ch. 4 - When using the sequential distribution method of...Ch. 4 - When using the sequential distribution method of...Ch. 4 - Is it possible to close the total factory overhead...Ch. 4 - What are the shortcomings of waiting until the...Ch. 4 - What are the two types of budget data needed to...Ch. 4 - Prob. 21QCh. 4 - What factory operating conditions and data are...Ch. 4 - Prob. 23QCh. 4 - How does activity-based costing differ from...Ch. 4 - What steps must a company take to successfully...Ch. 4 - What is the relationship between activity-based...Ch. 4 - Prob. 27QCh. 4 - Prob. 28QCh. 4 - If the factory overhead control account has a...Ch. 4 - Prob. 30QCh. 4 - Classify each of the following items of factory...Ch. 4 - Ames Automotive Company has accumulated the...Ch. 4 - Prob. 3ECh. 4 - Using the data in E4-2 and spreadsheet software,...Ch. 4 - El Paso Products Company has accumulated the...Ch. 4 - Computing unit costs at different levels of...Ch. 4 - Identifying basis for distribution of service...Ch. 4 - A manufacturing company has two service and two...Ch. 4 - A manufacturing company has two service and two...Ch. 4 - Compute the total job cost for each of the...Ch. 4 - Classify each of the following items of factory...Ch. 4 - Job 25AX required 5,000 for direct materials,...Ch. 4 - Job 19AB required 10,000 for direct materials,...Ch. 4 - Match each of the following cost pools with the...Ch. 4 - The books of Petry Products Co. revealed that the...Ch. 4 - The general ledger of Lawson Lumber Co. contains...Ch. 4 - Nelson Fabrication Inc. had a remaining credit...Ch. 4 - Housley Paints Co. had a remaining debit balance...Ch. 4 - The cost behavior patterns below are lettered A...Ch. 4 - Miller Minerals Co. manufactures a product that...Ch. 4 - Scattergraph method Using the data in P4-2 and a...Ch. 4 - Using the data in P4-2 and Microsoft Excel: 1....Ch. 4 - Listed below are the budgeted factory overhead...Ch. 4 - Menlo Materials is divided into five departments,...Ch. 4 - Distribution of service department costs to...Ch. 4 - Journalizing the distribution of service...Ch. 4 - Channel Products Inc. uses the job order cost...Ch. 4 - Determining job costcalculation of predetermined...Ch. 4 - Focus Fabrication Co. uses ABC. The factory...Ch. 4 - Mansfield Manufacturing Co. uses ABC. The factory...Ch. 4 - Hughes Products Inc. uses a job order cost system....Ch. 4 - Abbey Products Company is studying the results of...Ch. 4 - The following information, taken from the books of...Ch. 4 - Rockford Company has four departmental accounts:...Ch. 4 - Luna Manufacturing Inc. completed Job 2525 on May...Ch. 4 - Phillips Products, Inc. had a remaining credit...Ch. 4 - Nathan Industries had a remaining debit balance of...Ch. 4 - Chrome Solutions Company manufactures special...Ch. 4 - Activity-based Costing
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- Nathan Industries had a remaining debit balance of $20,000 in its under- and overapplied factory overhead account at year-end. It also had year-end balances in the following accounts: Required: Prepare the closing entry for the $20,000 of underapplied overhead, assuming that the balance is not considered to be material. Prepare the closing entry for the $20,000 of underapplied overhead, assuming that the balance is considered to be material.arrow_forwardHousley Paints Co. had a remaining debit balance of $25,000 in its under- and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The year-end balances of these accounts, before adjustment, showed the following: Determine the prorated amount of the underapplied factory overhead that is chargeable to each of the accounts. Prepare the journal entry to close the debit balance in Under-and Overapplied Factory Overhead.arrow_forwardNelson Fabrication Inc. had a remaining credit balance of $20,000 in its under- and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The year-end balances of these accounts, before adjustment, showed the following: Determine the prorated amount of the overapplied factory overhead that is chargeable to each of the accounts. Prepare the journal entry to close the credit balance in Under-and Overapplied Factory Overhead.arrow_forward
- If the factory overhead control account has a credit balance of 2,000 at the end of the first month of the fiscal year, has the overhead been under- or overapplied for the month? What are some probable causes for the credit balance?arrow_forwardAt the end of the fiscal year, there s a relatively minor balance in the factory overhead account. What procedure can be used for disposing of the balance in the accountarrow_forwardDavidson Company's manufacturing overhead account showed a $6,200 under-allocated balance on December 31, 2019. Other accounts showed the following balances on December 31, 2019: Materials inventory $50,000 WIP inventory $30,000 Finished goods inventory $20,000 COGS $100,000 Davidson adjusts COGS for the balance in manufacturing overhead. The balance in COGS after closing out the balance in manufacturing overhead is:arrow_forward
- A company's Factory Overhead account shows total debits of $684,000 and total credits of $708,000 at the end of the year. 1. Compute the under- or overapplied overhead. 2. Prepare the journal entry to close the balance in the Factory Overhead account to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the under- or overapplied overhead. Factory Overhead Required 1 Required 2 >arrow_forwardA company's Factory Overhead account shows total debits of $675,000 and total credits of $698,700 at the end of the year. 1. Compute the under- or overapplied overhead. 2. Prepare the journal entry to close the balance in the Factory Overhead account to Cost of Goods Sold. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the under- or overapplied overhead. Total actual overhead cost Total applied overhead costarrow_forward2. Lakeshore Company allocates overhead using direct labour-hours. For 2020, the estimated and actual labour-hours were 182,000 and 168,000 respectively, and the predetermined overhead rate used to apply overhead for the year was $24.40 per direct labour-hour. The manufacturing overhead control T-account showed a credit balance of $184,600 at the end of the year, and this balance was disposed of at the end of the year by closing it to cost of goods sold. Required: 1. Was manufacturing overhead under- or overapplied? 2. Compute the actual overhead amount incurred over the year. 3. How will end-of-period disposal of this amount impact net income?arrow_forward
- Pharoah Engineering Contractors incurred employee payroll costs of $32,400 ($25,200 direct and $7,200 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor cost. Record the entries to assign payroll liabilities and to apply overhead. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation (To record service salary and wages) (To record the applied overhead) Debit Creditarrow_forwardClosing under- and overapplied overhead at year-end: Plano Products, Inc., had a remaining credit balance of $10,000 in its under- and overapplied factory overhead account at yearend. It also had year-end balances in the following accounts: Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000Finished Goods ............................................................................... 15,000Cost of Goods Sold . .................................................................... 85,000Total ............................................................................................... $125,000 Required:1. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is not considered to bematerial.2. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is considered to be material.arrow_forwardWildhorse Engineering Contractors incurred employee payroll costs of $43,920 ($34,160 direct and $9,760 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor cost. Record the entries to assign payroll liabilities and to apply overhead. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation (To record service salary and wages) (To record the applied overhead) Debit Creditarrow_forward
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