Response to the following problem:
ETA Company had a remaining credit balance of $20,000 in its under- and over-applied 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
a. Determine the prorated amount of the over-applied factory overhead that is chargeable to each of the accounts.
b. Prepare the journal entry to close the credit balance in Under- and Over-applied Factory Overhead.