Question

jensen company uses a job - order costing system. which year - end journal entry could jensen make to dispose of (close out) $3,500 of overapplied manufacturing overhead cost?
finished goods $3,500
a manufacturing overhead $3,500
cost of goods sold $3,500
b manufacturing overhead $3,500
manufacturing overhead $3,500
c finished goods $3,500
manufacturing overhead $3,500
d cost of goods sold $3,500
choice b
choice c
choice d

Explanation:

When manufacturing overhead is over - applied, it means that more overhead was applied to jobs than was actually incurred. The manufacturing overhead account has a credit balance (since applied overhead is credited to the account). To close out the over - applied overhead, we need to debit the manufacturing overhead account (to reduce its credit balance) and credit the cost of goods sold (because over - applied overhead reduces the cost of goods sold).

Answer:

C. Manufacturing Overhead $3,500, Cost of Goods Sold $3,500