At the end of year 2010, Luke Maximillian Company's accounts exhibited a credit balanceof $66,000 in Manufacturing Overhead Control. Additionally, the firm have the givenaccount balances:Work in Process Inventory$384,000Finished Goods Inventory96,000Cost of Goods Sold720,000a. If the balance is considered immaterial, prepare the necessary journal entry to closethe overhead account.b. If the balance is considered material, prepare the necessary journal entry to close theoverhead account.c. Which method is more appropriate for the company? and why?

Solution:- a)Preparation of necessary journal entry to close the overhead account if the balance is…

a. If the balance is considered immaterial, prepare the necessary journal entry to closS the overhead account. b. If the balance is considered material, prepare the necessary journal entry to close th overhead account. c. Which method is more appropriate for the company? and why?

a. If the balance is considered immaterial, prepare the necessary journal entry to closS the overhead account. b. If the balance is considered material, prepare the necessary journal entry to close th overhead account. c. Which method is more appropriate for the company? and why?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

At the end of year 2010, Luke Maximillian Company's accounts exhibited a credit balance
of $66,000 in Manufacturing Overhead Control. Additionally, the firm have the given
account balances:
Work in Process Inventory
$384,000
Finished Goods Inventory
96,000
Cost of Goods Sold
720,000
a. If the balance is considered immaterial, prepare the necessary journal entry to close
the overhead account.
b. If the balance is considered material, prepare the necessary journal entry to close the
overhead account.
c. Which method is more appropriate for the company? and why?

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