Sirmans Inc. has provided the following data for the month of August. There were
ID: 2487427 • Letter: S
Question
Sirmans Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Manufacturing overhead for the month was under applied by $4,000. The company allocates any under applied or over applied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The journal entry to record the allocation of any under applied or over applied manufacturing overhead for August would include the following: debit to Work in Process of 11,650 debit to Work in Process of 400 debit to Work in Process of 11650 credit to work in process of 400Explanation / Answer
Allocation of underapplied overhead of $4,000:
Therefore, work-in process is debited in the above journal entry so the 2nd option is correct.
Date Accounts and explanations Debit ($) Credit ($) Work in process ($3,100/$31,000*100 = 10%) ($4,000*10/100) 400 Manufacturing overhead 400 (To record the allocation of underapplied overhead to Work-in process based on overhead previously applied)