 In this presentation, we're going to take a look at multiple choice questions related to a job cost system. First question, the journal entry to apply overhead costs to jobs will credit factory overhead and debit, either A, overhead expense, B, cost of goods sold, C, job sheets account, D, finished goods inventory, or E, work in process. Let's go through the skin using the process of elimination. The journal entry to apply overhead costs to jobs will credit factory overhead and debit. Now note that this is one of those journal entries that basically one of those questions, which are asking for a journal entry and we don't know exactly what that journal entry number is, but we could still just write out the journal entry and I would write it out in journal entry form. They actually give us half of it here. So what we're doing is we're taking it out of factory overhead. So, you know, you can write down support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Factory overhead is going to be credited, let's say $100 and then we're going to debit something. And if you write it down in this format, at least it helps for me to we don't know what that account is. So we need the account helps for me to think about what the journal entry is going to be if I see it in journal entry format. So if you write down the debits of credits and make up a number, we're just put an X or dollar sign there. And then that might help you to think about about what the other side will be. So a is going to be overhead expense. Now, that might sound reasonable, except the fact that there is no they're not really an overhead expense overhead is going to be kind of an account that we're going to use to track overhead. We're not really going to expense it, we're going to put the overhead into the into the inventory. So it's going to go into work, it's going to go into work and process and then to finish goods. And then we'll expense it in the form of cost to get sold. So it's not that B says cost of goods sold. Now that's going to be the end product, you know, we are going to expense it to cost to get sold but not yet. It's going to go into inventory first. And then when we sell the inventory, it's going to be expensed in the format of cost of goods sold. So it's not that C says job sheets account. And we do use job sheets. Job sheets will be used but they're not going to be used to support a job sheets account. The job sheets are used to support either work and process or finished goods inventory. So that's not really an account. That's kind of a made up thing. It sounds like D says finished goods inventory. And you might think finished goods that sounds kind of reasonable. I'll keep that for now. And E says work and process inventory. So that sounds kind of reasonable. Those are two inventory formats, which is where the overhead would go to. So let's read it one more time. The journal entry to apply overhead cost to jobs will credit factory overhead and debit. So really what we're thinking is it's going out of one kind of inventory account and going into another. Which other one is it going into? Is it going into finished goods or work and process? And if you just think about the normal process of this, you would think it would first go to work and process and then finished goods. So that's going to be the process, the factory overhead. We're putting it there because we don't know what job to assign it to. And therefore we're putting it into factory overhead because we cannot put it in the work and process at the time incurred. Because we don't know which job it should go to. Then we're going to figure out which job it will go to based on an estimate later. So we're going to use some type of estimate. When we do that, we take it out of factory overhead and put it into work and process. And then once the job is done, of course, it'll go from work and process to finished goods. So final answer. The journal entry to apply overhead costs to jobs will credit factory overhead and debit. E work in process inventory. Next question. When overhead applied is less than actual overhead incurred. It is either wrong. Sounds could be. It's wrong in a way. I'll keep that for now. Be under applied or see over applied. And those sound like our two kind of terms. Those should sound kind of familiar if we've seen, you know, if we've gone through this under applied or over applied overhead. And then D says correctly applied. And that, you know, something's wrong, right? And they may have been correctly applied because it doesn't really mean it's wrong. But it's not that. And then C E says it's backwards. And that doesn't seem to apply here. I mean, so I don't think it's E. So between a B and C. Again, I would think that B and C should sound the most familiar a being wrong. It is kind of in a sense wrong, but it's an estimate. The estimate isn't wrong because it's an estimate. It's just an estimate. So it's always going to be wrong compared to actual. So B and C are really the correct answers. The rest of them, of course, are just fillers between, you know, the two options that we really have here is between under over applied. So when overhead applied is less than the actual overhead incurred, then we under applied the overhead. And so sometimes these under or over terms can get a little bit tricky. We start to they start to get mixed up in our heads. But if you think of the T account then of overhead, the actual costs will be on the debit side. And that's going to include direct labor. I mean, sorry, indirect labor and indirect materials. And then all other costs like utilities and whatnot that are going to be on the factory any other factory costs. And then we're going to credit to take it out. And that's when we apply it to work in process. So if you think about the T accounts, then these are the debits and this is going to be the credit. So when you think about it just in terms of over and under applied, it kind of makes more sense. We could say when overhead applied is less, it was we applied less. So therefore it's under applied. They could ask the same question in terms of, you know, are we left with a debit balance or are we left with a credit balance? And it does that mean we're under or over applied and just you have to apply out the T accounts so that the actual costs would be on the left. And then we would credit out how much was applied. So if the actual costs here on the left are higher than the amount we applied out, we would be left with a debit balance and we would have under applied. If the credit balance over here is higher than the amount of actual costs, we'd be left with that credit balance. And that would mean we had applied out more than the actual costs, which means we would have over applied. So final answer, when overhead applied is less than actual overhead incurred, it is be under applied.