Reference no: EM132473454
Question - Star Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 are given below.
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Star Videos, Inc. Balance Sheet January 1
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Assets
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Cash
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$87,400
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Accounts receivable
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107,200
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Inventories:
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Raw materials (film, costumes)
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$15,800
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Videos in process
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54,600
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Finished videos awaiting sale
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94,400
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164,800
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Prepaid insurance
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11,150
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Studio and equipment (net)
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582,000
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Total assets
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$952,550
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Liabilities and Stockholders' Equity
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Accounts payable
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$231,000
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Retained earnings
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721,550
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Total liabilities and stockholders' equity
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$952,550
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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 company's 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:
a. Film, costumes, and similar raw materials purchased on account, $199,000.
b. Film, costumes, and other raw materials issued to production, $207,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).
c. Utility costs incurred (on account) in the production studio, $78,800.
d. Depreciation recorded on the studio, cameras, and other equipment, $114,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.
e. Advertising expense incurred (on account), $179,000.
f. Salaries and wages paid in cash as follows:
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Direct labor (actors and directors)
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$91,200
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Indirect labor (carpenters to build sets, costume designers, and so forth)
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$83, 500
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Administrative salaries
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$112,200
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g. Prepaid insurance expired during the year. $9,300 (70% related to production of videos, and 30% related to marketing and administrative activities).
h. Miscellaneous marketing and administrative expenses incurred (on account), $10,650.
i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
j. Videos that cost $538,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
k. Sales for the year totaled $948.000 and were all on account.
I. The total cost to produce the videos that were sold according to their job cost sheets was $581,110.
m. Collections from customers during the year totaled $898.000.
n. Payments to suppliers on account during the year, $584,000.
o. 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.