Sharp Company's Records Show That Overhead Was Overapplied by $10,000

question 38

Multiple Choice

Sharp Company's records show that overhead was overapplied by $10,000 last year.This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year.In trying to determine why overhead was overapplied by such a large amount,the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error.Given the above information,which of the following statements is true?

• A) Manufacturing overhead was actually overapplied by $16,000 for the year.
• B) The company's net income is understated by $6,000 for the year.
• C) Under the circumstances described above, the error in recording depreciation would have no effect on net income for the year.
• D) The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

---

Definitions:

Respiratory Illnesses

Diseases that affect the lungs and respiratory system, potentially impacting breathing and oxygenation of blood.

Nuisance Doctrine

a legal principle that allows individuals to seek relief from disturbances or interferences with the use and enjoyment of their property.

Air-quality Standard

Regulations and guidelines intended to maintain or improve the quality of the air in outdoor or indoor spaces.

Stationary Sources

Fixed sites or installations that emit pollutants into the environment, such as factories or power plants.