# Question

Amarillo Products, Inc., had a remaining credit balance of \$10,000 in its under-and overapplied factory overhead account at year-end. It also had year-end balances in the following accounts:
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$ 25,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$125,000

Required:
1. Prepare the closing entry for the \$10,000 of overapplied overhead, assuming that the balance is not considered to be material.
2. Prepare the closing entry for the \$10,000 of overapplied overhead, assuming that the balance is considered to be material.

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