Cambridge Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $294,000 and machine hours to be 14,700. Actual manufacturing overhead and machine hours were $337,000 and 15,700, respectively. Required: 1. & 2. Prepare the journal entries for actual and applied manufacturing overhead and transfer of manufacturing overhead account balance to cost of goods sold. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation:

The journal entries are as follows

1. Manufacturing overhead Dr $337,000

       To Account payable $337,000

(Being the actual manufacturing overhead is recorded)

2. Work in process inventory Dr $314,000

         To Manufacturing overhead $314,000

(Being the applied manufacturing overhead is recorded)

The computation is shown below:

= $294,000 ÷ 14,700 machine hours × 15,700 machine hours

= $314,000

3. Cost of goods sold Dr $23,000      ($337,000 - $314,000)

      To Manufacturing overhead $23,000

(Being the under applied overhead is recorded)

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