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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 Sheet January 1 Assets Cash $ 91,200 Accounts receivable 109,400 Inventories: Raw materials (film, costumes) $12,000 Videos in process 51,600 Finished videos awaiting sale 86,600 150,200 Prepaid insurance 10,600 Studio and equipment (net) 627,000 Total assets $988,400 Liabilities and Stockholders' Equity Accounts payable $234,000 Retained earnings 754,400 Total liabilities and stockholders' equity 5983:400 Because the videos differ in length and in complexity of production, the company uses ajob-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, $226,000. b. Film, costumes, and other raw materials issued to production, $232,500 (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, $84,800. d. Depreciation recorded on the studio, cameras, and other equipment, $83,600. Three-fourths of this depreciation related to actual production ofthe videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred (on account), $145,000. f. Salaries and wages paid in cash as follows: Direct labor (actors and directors) $100,600 Indirect labor (carpenters to build sets, costume $93 000 designers, and so forth) ' Administrative salaries $106,400 g. Prepaid insurance expired during the year, $9,400 (70% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account), $12,750. i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camerahours of activity during the year. j. Videos that cost $500,000 to produce according to theirjob cost sheets were transferred to the nished videos warehouse to await sale and shipment. Sales for the year totaled $1,080,000 and were all on account. The total cost to produce the videos that were sold according to theirjob cost sheets was $540,450. Collections from customers during the year totaled $1,030,000. Payments to suppliers on account during the year, $534,000. 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
