Question: 1) Carlson Corporation applies overhead based upon Machine-hours. The amount of overhead applied to production is $274,320. Actual factory overhead was $287,920. Before disposition of over- or under applied overhead, the cost of gods sold was $560,000 and ending inventories were as follows:
Direct Materials: $60000
Work in Process: $190000
Finished Goods: $250000
Total: $500000
a) Prepare the journal entry to dispose of the over/under-applied overhead using the write- off to cost of goods sold approach
b) Prepare the journal entry to dispose of the over/under applied overhead using the proration approach.
c) Briefly describe the effect on financial statements and why?
Note: Please use manufacturing overhead control and manufacturing overhead applied accounts to prepare the journal entry.