If actual MOH amounts to 70,000 and applied MOH totals 75,000, what is the journal entry adjustment?

In this scenario, the actual manufacturing overhead (MOH) is less than the applied manufacturing overhead. When this occurs, it indicates that the company overapplied its overhead by 5,000.

To adjust for this overapplication, the Cost of Goods Sold (COGS) must be decreased. This is necessary because overapplied overhead represents costs that were allocated to products that were not actually incurred. Reducing COGS reflects this adjustment, ensuring that the expense aligns more closely with the actual costs incurred during the period.

Therefore, the correct journal entry would involve a debit to Manufacturing Overhead (to "zero out" the overapplied amount) and a credit to COGS, reflecting the reduction in the expense recognized. This adjustment ensures that the financial statements accurately portray the expenses related to production after accounting for the overhead application differences.

This underlines the importance of reconciling applied overhead with actual overhead to ensure that the financial performance of a company is represented accurately.