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Item5

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.

Star Videos, Inc.Balance SheetJanuary 1AssetsCash$92,000Accounts receivable115,600Inventories:Raw materials (film, costumes)$17,800Videos in process60,200Finished videos awaiting sale91,200169,200Prepaid insurance12,600Studio and equipment (net)603,000Total assets$992,400Liabilities and Stockholders' EquityAccounts payable$211,000Retained earnings781,400Total liabilities and stockholders' 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 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:

1. Film, costumes, and similar raw materials purchased on account, $208,500.
2. 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).
3. Utility costs incurred (on account) in the production studio, $81,600.
4. 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.
5. Advertising expense incurred (on account), $155,500.
6. Salaries and wages paid in cash as follows:

Direct labor (actors and directors)$99,200Indirect labor (carpenters to build sets, costume designers, and so forth)$100,500Administrative salaries$102,400

1. Prepaid insurance expired during the year, $10,050(70% related to production of videos, and30% related to marketing and administrative activities).
2. Miscellaneous marketing and administrative expenses incurred (on account), $10,350.
3. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
4. 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.
5. Sales for the year totaled $1,060,000 and were all on account.
6. The total cost to produce the videos that were sold according to their job cost sheets was $591,810.
7. Collections from customers during the year totaled $1,010,000.
8. Payments to suppliers on account during the year, $585,000.
9. Underapplied or overapplied overhead$__?__.

Required:

1. Prepare a transaction analysis that records all of the above transactions. Calculate the ending balances on December 31 for all balance sheet accounts.

2. Prepare a schedule of the cost of goods manufactured for the year.

3. Prepare a schedule of the cost of goods sold for the year.

4. Prepare an income statement for the year.