The Cherokee Company Uses a Predetermined Overhead Rate $\begin{array} { l }\text { Cost of Goods Sold } & \$ 12,000\\\text { Manufacturing Overhead }&\$12,000\end{array}$

question 136

Short Answer

The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials $20,000
Work in Process $40,000
Finished Goods $10,000
Cost of Goods Sold $50,000
If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be a. $\begin{array} { l }\text { Cost of Goods Sold } & \$ 12,000\\\text { Manufacturing Overhead }&\$12,000\end{array}$

b. $\begin{array} { l }\text { Cost of Goods Sold } & \$ 12,000\\\text { Manufacturing Overhead }&\$12,000\end{array}$

c. $\begin{array}{ll}\text { Raw Materials } & \$ 2,000 \\\text { Work in Frocess } & \$ 4,000 \\\text { Finished Goods } & \$ 1,000 \\\text { Cost of Goods Sold } & \$ 5,000\\\text { Manufacturing Overhead }&\$12,000\end{array}$

d. $\begin{array}{ll}\text { Manufacturing Overhead }&\$12,000\\\text { Raw Materials } & \$ 2,000 \\\text { Work in Frocess } & \$ 4,000 \\\text { Finished Goods } & \$ 1,000 \\\text { Cost of Goods Sold } & \$ 5,000\end{array}$

e. $\begin{array}{ll}\text { Manufacturing Overhead }&\$12,000\\\text { Work in Process } & \$ 4,800 \\\text { Finished Goods } & \$ 1,200 \\\text { Cost of Goods Sold } & \$ 6,000\end{array}$

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Definitions:

Financial Statement Analysis

The practice of examining and evaluating a firm's financial reports to improve financial decision-making.

Comparative Financial Statements

Financial statements that provide financial information for multiple periods, enabling comparison and trend analysis over time.

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity position, calculated by dividing liquid assets (excluding inventories) by current liabilities.

Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.