PA8.

LO 4.6Coop’s Stoops estimated its annual overhead to be $85,000 and based its predetermined overhead rate on 24,286 direct labor hours. At the end of the year, actual overhead was $90,000 and the total direct labor hours were 24,100. What is the entry to dispose of the overapplied or underapplied overhead?

Debit Credit

Factory overheads applied $85,000

Profit and loss account $5,000

(90,000-85,000)

Factory overheads control account $90,000

Explanation:

The entry to dispose of the overapplied or underapplied overhead are as under:

Debit Credit

Factory overheads applied $85,000

Profit and loss account $5,000

(90,000-85,000)

Factory overheads control account $90,000

(Factory overheads applied transferred to overheads control a/c and under applied overheads charged to P&L account)