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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: $67,000 106,000 Cash Accounts receivable Inventories: Raw materials (film, costumes ) Videos in process Finished videos awaiting sale Prepaid insurance 34,000 30,000 85,000 149,000 9,800 331,800 Total current assets Studio and equipment Less accumulated depreciation 738,000 214,000 524,000 $855,800 Total assets Liabilities and Stockholders' Equity Accounts payable Capital stock Retained earnings $157,800 $424,000 274,000 698,000 $855,800 Total liabilities and stockholders' equity 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 $352,000 in manufacturing overhead for an estimated allocation base of 8,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $189,000. b. Film, costumes, and other raw materials used in production, $204,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered indirect). c. Utility costs incurred on account in the production studio, $76,000. d. Depreciation recorded on the studio, cameras, and other equipment, $88,000. 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, $134,000. f. Costs for salaries and wages were incurred on account as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries 86,000 114,000 $ 99,000 g. Prepaid insurance expired during the year, $7,400 (75% related to production of videos, and 25% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred on account, $9,000 i. Studio (manufacturing) overhead was applied to videos in production. The company used 8,200 camera-hours during the year. j. Videos that cost $554,000 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 $933,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $604,000. I Collections from customers during the year totaled $854,000. m. Payments to suppliers on account during the year, $504,000; payments to employees for salaries and wages, $289,000 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? By how much? 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. Studio and Equipment Accumulated Depreciation Beg. Bal Beg. Bal. End. Bal End. Bal. Studio Overhead Depreciation Expense Beg. Bal. Beg. Bal. End. Bal End. Bal. Insurance Expense Advertising Expense Beg. Bal Beg. Bal. Miscellaneous Expense Administrative Salaries Expense Beg. Bal. Beg. Bal. End. Bal Cost of Goods Sold Sales Beg. Bal. Beg. Bal End. Bal End. Bal Cost of Goods Sold Sales Beg. Bal. Beg. Bal. End. Bal. End. Bal. Salaries &Wages Payable Accounts Payable Beg. Bal. Beg. Bal. End. Bal. End. Bal. Retained Earnings Capital Stock Beg. Bal. Beg. Bal. End. Bal. End. Bal Req 3 Req 6 Req 1 and 2 Req 4 Req 5 Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? Manufacturing overhead was overapplied by for the year Req 4 Req 1 and 2 Req 4 Req 1 and 2 Req 3 Req 5 Req 6 Prepare a schedule of cost of goods manufactured. Supreme Videos, Inc. Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Raw materials used in production Total manufacturing costs 0 Cost of goods manufactured Prepare a schedule of cost of goods sold. Supreme Videos, Inc. Schedule of Cost of Goods Sold Prepare an income statement for the year. SUPREME VIDEOS, INC. Income Statement For the Year Ended December 31 0 Selling and administrative expenses: 0 0 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: $67,000 106,000 Cash Accounts receivable Inventories: Raw materials (film, costumes ) Videos in process Finished videos awaiting sale Prepaid insurance 34,000 30,000 85,000 149,000 9,800 331,800 Total current assets Studio and equipment Less accumulated depreciation 738,000 214,000 524,000 $855,800 Total assets Liabilities and Stockholders' Equity Accounts payable Capital stock Retained earnings $157,800 $424,000 274,000 698,000 $855,800 Total liabilities and stockholders' equity 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 $352,000 in manufacturing overhead for an estimated allocation base of 8,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $189,000. b. Film, costumes, and other raw materials used in production, $204,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered indirect). c. Utility costs incurred on account in the production studio, $76,000. d. Depreciation recorded on the studio, cameras, and other equipment, $88,000. 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, $134,000. f. Costs for salaries and wages were incurred on account as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries 86,000 114,000 $ 99,000 g. Prepaid insurance expired during the year, $7,400 (75% related to production of videos, and 25% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred on account, $9,000 i. Studio (manufacturing) overhead was applied to videos in production. The company used 8,200 camera-hours during the year. j. Videos that cost $554,000 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 $933,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $604,000. I Collections from customers during the year totaled $854,000. m. Payments to suppliers on account during the year, $504,000; payments to employees for salaries and wages, $289,000 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? By how much? 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. Studio and Equipment Accumulated Depreciation Beg. Bal Beg. Bal. End. Bal End. Bal. Studio Overhead Depreciation Expense Beg. Bal. Beg. Bal. End. Bal End. Bal. Insurance Expense Advertising Expense Beg. Bal Beg. Bal. Miscellaneous Expense Administrative Salaries Expense Beg. Bal. Beg. Bal. End. Bal Cost of Goods Sold Sales Beg. Bal. Beg. Bal End. Bal End. Bal Cost of Goods Sold Sales Beg. Bal. Beg. Bal. End. Bal. End. Bal. Salaries &Wages Payable Accounts Payable Beg. Bal. Beg. Bal. End. Bal. End. Bal. Retained Earnings Capital Stock Beg. Bal. Beg. Bal. End. Bal. End. Bal Req 3 Req 6 Req 1 and 2 Req 4 Req 5 Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? Manufacturing overhead was overapplied by for the year Req 4 Req 1 and 2 Req 4 Req 1 and 2 Req 3 Req 5 Req 6 Prepare a schedule of cost of goods manufactured. Supreme Videos, Inc. Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Raw materials used in production Total manufacturing costs 0 Cost of goods manufactured Prepare a schedule of cost of goods sold. Supreme Videos, Inc. Schedule of Cost of Goods Sold Prepare an income statement for the year. SUPREME VIDEOS, INC. Income Statement For the Year Ended December 31 0 Selling and administrative expenses: 0 0