Question

At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?
a. Overapplied, deferred credit
b. Underapplied, deferred debit
c. Underapplied, deferred credit
d. Overapplied, deferred debit

Answer 1

Under applied, deferred debit describes the nature of this balance

Explanation:

A deferred debit is a non-consuming expense, and is therefore marked as an expenditure temporarily. The costs are paid to the bill once the expenditures have been expended. Deferred loans usually occur in the balance sheet as a taxable asset in the accrued spending account.

The overhead is under-applied where a cost accounting system includes overhead costs allocated to an employment-in-progress commodity which do not exceed the actual overall cost. The prices of the products sold are the real costs of the manufacture of the goods sold by an undertaking.