Answer (D) is correct . Under a normal costing system, overhead is applied to all jobs worked on during the period at a predetermined rate. Because cost of goods sold, finished goods inventory, and work-in-process inventory all relate to these jobs, each should be adjusted by its proportionate share of over- or underapplied overhead. This apportionment may be based on either the percentage of total overhead (theoretically preferable) or the percentage of total cost. The entry to close overapplied overhead requires credits to these three accounts.
Answer (A) is incorrect because Cost of goods sold should be credited (not debited) for its share of overapplied overhead.
Answer (B) is incorrect because Cost of goods sold, finished goods inventory, and work-in-process inventory should be credited (not debited).
Answer (C) is incorrect because Although commonly used, the immediate write-off method is not as conceptually sound as the allocation among cost of goods sold, finished goods inventory, and work-in-process inventory.
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