Moira Company Has Just Finished Its First Year of Operations

question 93

Essay

Moira Company has just finished its first year of operations and must decide which method to use for adjusting cost of goods sold. Because the company used a budgeted indirect-cost rate for its manufacturing operations, the amount that was allocated ($435,000) to cost of goods sold was different from the actual amount incurred ($425,000).
Ending balances in the relevant accounts were:

Required:
a.Prepare a journal entry to write off the difference between allocated and actual overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated and actual overhead using ending account balances. Be sure your journal entry closes the related overhead accounts.

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Definitions:

Integrity

The quality of being honest and having strong moral principles; moral uprightness.

Sense of Identity

An individual's perception of themselves, their traits, beliefs, and personality.

Basic Trust

A fundamental sense of trust in one's environment and others, considered to be an essential aspect of psychological development in the early years of life.

Conventional Morality

A stage in moral development where individuals make judgments based on societal norms and rules.