Star Videos, Inc., produces short musical videos for sale to retail outlets. The companyâs balance sheet accounts as of January 1 are given below.
Star Videos, Inc.
Balance Sheet
January 1
Assets
Cash $ 92,000
Accounts receivable 115,600
Inventories:
Raw materials (film, costumes) $ 17,800
Videos in process 60,200
Finished videos awaiting sale 91,200 169,200
Prepaid insurance 12,600
Studio and equipment (net) 603,000
Total assets $ 992,400
Liabilities and Stockholdersâ Equity
Accounts payable $ 211,000
Retained earnings 781,400
Total liabilities and stockholdersâ equity $ 992,400
Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The companyâs predetermined overhead rate for the year ($40 per camera-hour) is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. Any underapplied or overapplied overhead is closed to cost of goods sold. The following transactions were recorded for the year:
Film, costumes, and similar raw materials purchased on account, $208,500.
Film, costumes, and other raw materials issued to production, $219,500 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).
Utility costs incurred (on account) in the production studio, $81,600.
Depreciation recorded on the studio, cameras, and other equipment, $90,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.
Advertising expense incurred (on account), $155,500.
Salaries and wages paid in cash as follows:
Direct labor (actors and directors) $ 99,200
Indirect labor (carpenters to build sets, costume designers, and so forth) $ 100,500
Administrative salaries $ 102,400
Prepaid insurance expired during the year, $10,050 (70% related to production of videos, and 30% related to marketing and administrative activities).
Miscellaneous marketing and administrative expenses incurred (on account), $10,350.
Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
Videos that cost $548,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
Sales for the year totaled $1,060,000 and were all on account.
The total cost to produce the videos that were sold according to their job cost sheets was $591,810.
Collections from customers during the year totaled $1,010,000.
Payments to suppliers on account during the year, $585,000.
Underapplied or overapplied overhead $__?__.
Required:
1. Prepare a transaction analysis that records all of the above transactions.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Prepare a schedule of cost of goods sold for the year.
4. Prepare an income statement for the year.
PLEASE SHOW ALL WORK AND BOLD ANSWERS. THANK YOU!!
Prepare a transaction analysis that records all of the above transactions. (Amounts to be deducted should be indicated by a minus sign.)
