The Marina Corp The Application of Overhead Has Resulted in a $5,600 Credit

question 11

Multiple Choice

The Marina Corp. has applied overhead to jobs during the period as follows: $\begin{array} { l c } \text { Jobs finished and sold } & \$ 46,000 \\\text { Jobs started and in process } & 54,000 \\\text { Jobs finished and unsold } & 100,000\end{array}$
The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is:

• A) Debit Work in Process Inventory $5,600; credit Factory Overhead $5,600.
• B) Debit Factory Overhead $5,600; credit Work in Process Inventory $5,600.
• C) Debit Factory Overhead $5,600; credit Cost of Goods Sold $5,600.
• D) No entry is needed.
• E) Debit Cost of Goods Sold $5,600; credit Factory Overhead $5,600.

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Definitions:

Basis

The amount paid for an asset or investment, used to calculate gain or loss for tax purposes.

Active Participation

Involvement in making management decisions and the right to make significant and bona fide contributions to the operating and financial management of an activity.

Material Participation

A taxpayer's active and regular involvement in the operations of a business to qualify for certain tax benefits.

Passive Activity

An economic activity in which the investor does not materially participate and often includes rental activities or limited partnerships.