Closing under and overapplied overhead at year-end

Amarillo Products, Inc., had a remaining credit balance of $10,000 in its under-and overapplied

Amarillo Products, Inc., had a remaining credit balance of $10,000 in its under-and overapplied factory overhead account at year-end. It also had year-end balances in the following accounts:

Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000

Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000

Required:

1. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is not considered to be material.

2. Prepare the closing entry for the $10,000 of overapplied overhead, assuming that the balance is considered to be material.