Bullz Company manufactures an energy drink. The company uses a ...

[mcmcdaniel]

Bullz Company manufactures an energy drink. The company uses a budgeted indirect-cost rate for its manufacturing operations and during 2014 allocated 1,000,000 to work-in-process inventory. Actual overhead incurred was 1,200,000.
 
  Ending balances in the following accounts are:
   Work-in-Process  100,000
   Finished Goods 750,000
   Cost of Goods Sold 4,150,000
 
  Required:
  a. Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related overhead accounts.
 
  b. Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.

Question 2

The balance of an account is determined by
 a. adding all of the debits to all of the credits
  b. always subtracting the debits from the credits
  c. always subtracting the credits from the debits
  d. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum

[zacnyjessica]

Answer to Question 1

Answer:
a. Manufacturing Overhead Allocated 1,000,000
Cost of Goods Sold 200,000
Manufacturing Overhead Control 1,200,000

b. Work-in-process 100,000 2.0  200,000 = 4,000
Finished goods 750,000 15.0  200,000 = 30,000
Cost of goods sold 4,150,000 83.0  200,000 = 166,000
Total 5,000,000 100.0

Manufacturing Overhead Allocated 1,000,000
Work-in-Process 4,000
Finished Goods 30,000
Cost of Goods Sold 166,000
Manufacturing Overhead Control 1,200,000

Answer to Question 2

d