Response to the following problem:
Plano Products, Inc., had a remaining credit balance of $10,000 in its under- and over-applied factory overhead account at yearend. 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 over-applied overhead, assuming that the balance is not considered to be material.
2. Prepare the closing entry for the $10,000 of over-applied overhead, assuming that the balance is considered to be material.