Nelson Fabrication Inc. had a remaining credit balance of $20,000 in its under-and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The year-end balances of these accounts, before adjustment, showed the following:
Work in Process......................................................... $ 25,000
Finished Goods......................................................... 25,000
Cost of Goods Sold ................................................. 100,000
Total.......................................................................... $150,000
a. Determine the prorated amount of the overapplied factory overhead that is chargeable to each of the accounts.
b. Prepare the journal entry to close the credit balance in Under-and Overapplied Factory Overhead.