Check Exercise 3-8 Applying Overhead; Journal Entries; Disposing of Underapplied
ID: 2335967 • Letter: C
Question
Check Exercise 3-8 Applying Overhead; Journal Entries; Disposing of Underapplied or Overapplied Overhead LO3-1, L03-2, LO3-4] The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year Manufacturing Overhead Hork in Process Finished Goods 465,408 (b 387,840 Bal. 19,160 (c) 718,000 Bal 48,000(d) 718,000 644,000 267,000 86,000 387,840 42,000 Bal 77,568 Bal 122,000 Bal Cost of Goods Sold 644,000 The overhead that had been applied to production during the year is distributed among Work in Process, Finished Goods, and Cost of Goods Sold as of the end of the year as follows Work in Process, ending Finished Goods, ending Cost of Goods Sold 20,160 58,560 309,120 387,840 Overhead applied For example, of the $42,000 ending balance in work in process, $20,160 was overhead that had been applied during the year Required: 1. Identify reasons for entries (a) through (d). 2. Assume that the underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare the necessary journal entry 3. Assume that the underapplied or overapplied overhead is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the necessary journal entryExplanation / Answer
Req 1. Entries No. Reason a. Manufacturing overheads incurred debited to OH b. Manufacturing overheads applied to WIP inventory. Hence, debited to WIP inventory and credited to OH c. Cost of goods completed transferred from wip to Finished Goods. Hence, debited to Finished goods and credited to WIP inventory. d. Cost of goods sold transferred to Cost of goods sold account by debiting and crdit being given to Finished goods inventory. Req 2. Journal entry for under-applied Overheads: Cost of goods sold Account Dr. 77568 Manufacturing Overheads 77568 Req 3. Under-applied OH allocation: Inventory Balance Proportion Under-app Under-applied OH Overheads allocated WIP 42000 5.20% 77568 4033 FG 122000 15.10% 77568 11713 Cost of goods sold 644000 79.70% 77568 61822 TOTAL 808000 100% 77568 77568 Journal entry for Under-appled Overheads: Work in process inventory Dr. 4033 Finished Goods inventory Dr. 11713 Cost of goods sold Dr. 61822 Manufacturing Overheads 77568