College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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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?

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In its first year of operation, Oriole Printing Shop estimated manufacturing overhead costs and activity in order to determine a predetermined overhead rate. At year end, March 31, overhead was over-applied by $3,400. It has been decided this over-applied overhead is material at the end of the year and the amount should be allocated among work in process 13%, finished goods 26%, and the rest to the cost of goods sold. Prepare the adjusting entry to close out the over-applied overhead. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Dec. 31 I Debit Credit
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College Accounting, Chapters 1-27

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