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Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, are given below. Supreme Videos, Inc. Balance Sheet January 1 Assets Current assets: Cash $ 69,000 Accounts receivable 108,000 Inventories: Raw materials (film, costumes) $ 36,000 Videos in process 51,000 Finished videos awaiting sale 87,000 174,000 Prepaid insurance 10, 200 Total current assets 742,000 361, 200 Studio and equipment Less accumulated depreciation 216,000 526,000 Total assets 5887, 200 Liabilities and Stockholders' Equity Accounts payable $185, 200 Capital stock $426,000 Retained earnings 276,000 702,000 Total liabilities and stockholders' equity $887, 200 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 is based on a cost formula that estimated $200,000 in manufacturing overhead for an estimated allocation base of 4,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $191,000. b. Film, costumes, and other raw materials used in production, $206,000 (75% of this material was considered direct to the videos in production, and the other 25% was considered indirect). c. Utility costs incurred on account in the production studio, $78,000. d. Depreciation recorded on the studio, cameras, and other equipment, $90,000. Three fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred on account, $136,000. f. Costs for salaries and wages were incurred on account as follows:Required: 1. Prepare a T-account for each account on the company's balance sheet and enter the beginning balances. 2. Record the transactions directly into the T-accounts. Key your entries to the letters (a) through (m) above. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? 4. Prepare a schedule of cost of goods manufactured. 5. Prepare a schedule of cost of goods sold. 6. Prepare an income statement for the year. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Reg 4 Req 5 Reg 6 Prepare a schedule of cost of goods sold. Supreme Videos, Inc. Schedule of Cost of Goods Sold
