Question

Altoid Company sold most of its inventory produced during the period. The manager needs to close the $1,200 balance of Manufacturing Overhead. The company uses a predetermined manufacturing overhead rate to allocate manufacturing overhead to individual jobs. The jobs were undercosted during the period. Which of the following is the correct entry to close the books at the end of the period?

Answer 1

Explanation:

The journal entry to close the books is

Cost of Goods sold A/c Dr $1,200

       To Manufacturing Overhead A/c $1,200

(Being the under-applied overhead is recorded)

Since the jobs were undercosted, that means the overhead is applied under overhead so we debited the cost of goods sold account and credited the manufacturing overhead account. Both the items are recorded for $1,200