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A company debits overhead applied account, debits cost of goods sold account and credits overhead...

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Question

Accounting

A company debits overhead applied account, debits cost of goods sold account and credits overhead costs account. Why?

  1. This is a wrong entry.
  2. The company closes the applied accounts with the relevant cost account while selling a product.
  3. The company is accounting for the normal capacity variance while closing the applied and cost accounts.
  4. The company is adjusting the cost of goods sold account due to a damage in the production process.

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