ADJUSTING ENTRIES INCLUDING UNDERAPPLIED/OVERAPPLIED OVERHEAD
Data for the end-of-year adjustments of Jones Company are shown below.
(a) Factory overhead is applied at a rate of 80% of direct labor costs. At the end of the year, the direct labor costs associated with the jobs still in process amounted to $10,000.
(b) Based on a physical count of factory supplies at the end of the year, it is determined that $3,525 of factory supplies were used during the year.
(c) Based on a review of the insurance policy files, it is determined that $4,295 of insurance on the factory building and equipment has expired.
(d) Depreciation expense for the year was $5,450 on the factory building and $8,735 on the factory equipment, a total of $14,185.
(e) The factory overhead account has a debit balance of $233,175 and a credit balance of $236,600 [after recording adjustments (a) through
(d).
1. Prepare adjusting journal entries as of December 31.
2. Was factory overhead under- or overapplied for the year?