Question

At December 31, balances in Manufacturing Overhead are Blossom Company—debit $1,180, Crane Company—credit $940. Prepare the adjusting entry for each company at December 31, assuming the adjustment is made to cost of goods sold. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Adjusting entries for manufacturing overhead at the end of the year for Blossom Company and Crane Company involve debiting or crediting the cost of goods sold account to reflect under- or over-applied overhead costs respectively.

Step-by-step explanation:

The student's question involves adjusting entries for manufacturing overhead at the end of the year for two companies: Blossom Company with a debit balance and Crane Company with a credit balance. The adjustment is aimed to align the manufacturing overhead account with the actual incurred costs by transferring the balance to the cost of goods sold.

For Blossom Company, since there is a debit balance of $1,180 in manufacturing overhead, this indicates an under-applied overhead. The adjusting entry would be:

• Debit: Cost of Goods Sold $1,180
• Credit: Manufacturing Overhead $1,180

For Crane Company, the credit balance of $940 suggests over-applied overhead. The adjusting entry would look like this:

• Debit: Manufacturing Overhead $940
• Credit: Cost of Goods Sold $940

These entries ensure that the cost of goods sold reflects the actual manufacturing overhead costs for the year.