Waco Products Inc. had a remaining debit balance of $20,000 in its under-and overapplied factory overhead account at year-end. It also had year-end balances in the following accounts:

Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000

Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000

Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $100,000

Required:

1. Prepare the closing entry for the $20,000 of underapplied overhead, assuming that the balance is not considered to be material.

2. Prepare the closing entry for the $20,000 of underapplied overhead, assuming that the balance is considered to be material.