Problem 3-17 (Algo) Cost Flows; T-Accounts; Income Statement [LO3-2, LO3-3, LO3-4] Supreme Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 , are given below. 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 $360,000 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, $196,000. b. Film, costumes, and other raw materials used in production, $211,000(70% of this material was considered direct to the videos in production, and the other 30% was considered indirect). c. Utility costs incurred in the production studio, $83,000. d. Depreciation recorded on the studio, cameras, and other equipment, $95,000. 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, $141,000. f. Costs for salaries and wages were incurred as follows: g. Prepaid insurance expired during the year, $8,100 (70\% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $9,700. i. Studio (manufacturing) overhead was applied to videos in production. The company used 8,200 camera-hours during the year. j. Videos that cost $561,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to awa sale and shipment. k. Sales for the year totaled $947,000 and were all on account. The total cost to produce these pideos according to their job cost sheets was $611,000. 1. Collections from customers during the year totaled $861,000. m. Payments to suppliers on account during the year, \$511,000; payments to employees for salaries and wages, $302,000. 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
