Question

The following information is taken from the accounts of Latta Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year.

Manufacturing Overhead
(a)	463,104	(b)	385,920
Bal.	77,184

Work in Process
Bal.	20,080	(c)	714,000
	263,500
	85,500
(b)	385,920
Bal.	41,000

Finished Goods
Bal.	49,000	(d)	642,000
(c)	714,000
Bal.	121,000

Cost of Goods Sold
(d)	642,000

The overhead that had been applied to production during the year is distributed among Work in Process, Finished Goods, and Cost of Goods Sold as of the end of the year as follows:

Work in Process, ending	$	19,680
Finished Goods, ending		58,080
Cost of Goods Sold		308,160
Overhead applied	$	385,920

For example, of the $41,000 ending balance in work in process, $19,680 was overhead that had been applied during the year.

Required:

1. Identify reasons for entries (a) through (d).

2. Assume that the underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare the necessary journal entry.

3. Assume that the underapplied or overapplied overhead is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the necessary journal entry.

Answer 1

1) Identification

a) Actual manufacturing overhead

b) Applied manufacturing overhead

c) Cost of goods manufactured

d) Cost of goods sold

2) Journal entry

Date	account and explanation	Debit	Credit
	Cost of goods sold	77184
	Manufacturing overhead		77184

3) Journal entry

Date	account and explanation	Debit	Credit
	Work in process	3936
	Finished goods	11616
	Cost of goods sold	61632
	Manufacturing overhead		77184