Question

Neumann Incorporated had the following selected account balances at the end of 2018:

Work in Process: $200,000

Finished Goods: $150000

Cost of Goods Sold: $250,000

Factory Overhead (over-applied): $18000

Amount of factory overhead applied in 2018: $300,000

a. Give the journal entry to record the factory overhead applied.

b. what is the actual overhead for the year?

c. Give the journal entry to dispose of the Factory Overhead balance assuming it is written off to Cost of Goods Sold.

d. What would be the ending balance in the Cost of Goods Sold account after making entry C?

Answer 1

(a)

The Preparation of Journal entry to record the factory overhead applied. We have, The Work in Process Account - Dr $ 200,000 The Factory Overhead Account- Cr $ 200,000 (To apply the factory overhead to work in process)

(b)

Computation of actual overhead for the year. We have, The Actual Overhead = Applied Overhead - Over Applied The Actual Overhead = 200,000 - 18,000 = $ 182,000 Hence, the Actual overhead for the year is $ 182,000.

(c)

Preparation of the journal entry to dispose of the Factory overhead balance assuming it is written off to cost of goods sold. We have, Factory overhead Account Dr- $18,000    Cost of Goods Sold Cr- $ 18,000

(d)

Preparation of the journal entry to dispose of the Factory overhead balance assuming it is allocated among Work in Process, Finished Goods, and Cost of Goods Sold based on ending balances. We have,

Step1: Apportionment of over-applied cost into Work in process, Finished Goods and costs of goods sold. We have,

Particulars	Overhead Costs($)	Calculation	Over-applied costs ($)
Work in Process	200,000	18,000 x 2/6	6,000
Finished Goods	150,000	18,000 x 1.50/6	4,500
Cost of Goods Sold	250,000	18,000 x 2.50/6	7,500
Total	600,000		18,000

Step2: Journal entry. We have,

Factory Overhead Account - Dr $ 18,000

Work in process Account - Cr $ 6,000

Finished Good Account - Cr $ 4,500

Cost of Goods Sold Account- Cr $ 7,500