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

question 5

Multiple Choice

Sharp Company's records show that overhead was overapplied by $10,000 last year.This overapplied manufacturing 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 posed above,the error in recording depreciation would have no effect on net operating income for the year.
• D)The $6,000 in depreciation should have been charged to Work in Process rather than to administrative expense.

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Definitions:

Foreign Sovereign Immunities Act

U.S. legislation that sets limitations on lawsuits against foreign governments in the U.S. courts, defining the scope of sovereign immunity.

Immune

Having protection or resistance against a specific disease, condition, or legal liability.

Multinational Enterprise

A company that owns or controls production or service facilities in one or more countries other than its home country.

National Borders

The defined lines that distinguish the geographic boundaries of sovereign nations.