Chapter 27, Problem 1SEB

ADJUSTING ENTRIES INCLUDING ADJUSTMENT FOR UNDERAPPLIED/OVERAPPLIED FACTORY OVERHEAD Prepare the December 31 adjusting journal entries for Keiser Company. Data are as follows:

1. (a) Factory overhead is applied at a rate of 80% of direct labor costs. At the end of the year, the direct labor costs associated with the jobs still in process totaled $7,000.
2. (b) A physical count of factory supplies at the end of the year shows that $3,750 of factory supplies were used during the year.
3. (c) A review of the insurance policy files shows that $4,360 of insurance on the factory building and equipment has expired.
4. (d) Depreciation expense for the year on the factory building was $9,400 and on factory equipment was $11,600, a total of $21,000.
5. (e) The factory overhead account has a debit balance of $146,700 and a credit balance of $143,200 [after recording adjustments (a) through (d)]. Use Cost of Goods Sold for this adjustment.

Was factory overhead underapplied or overapplied for the year?