A company’s Factory Overhead T-account shows total debits of $624,000 and total credits of $646,000 at the end of the year.
a. Prepare the journal entry to close the balance in the Factory overhead account to cost of goods sold.

The journal entry is

Dr Cost of sales $22,000

Cr Factory overhead$22,000.

Explanation:

At the end of the year:

Total debits equal $624,000

Total credits equal $646,000.

The difference is $646,000 - $624,000 = $22,000

This $22,000 will be the balance at the beginning of the following year.

So the journal entry to close the balance in the Factory overhead account to cost of goods sold is:

Dr Cost of sales $22,000

Cr Factory overhead$22,000.

This means the overhead is under-applied(actual overhead is greater than the budgeted cost)

answernet income for 2017 will be greater if the inventory quantity declines;