PROBLEM 3-17 Cost Flows: T-Accounts; Income Statement L03-2103-3103-4 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 Accounts receivable Raw materials in, costumes Videos in process Finished videos awaiting sale Prepaid insurance Totalcumente Studio and equipment Less accumulated depreciation Liabilities and Stockholders' Equity Accounts payable Capital stock Retained eamings Total abilities and stockholders' equity- $ 30,000 45.000 $ 63.000 102.000 1,000 156.000 5.000 330.000 730,000 210,000 520,000 $850,000 $160,000 $420,000 270,000 690,000 $850.000 Became 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 predeter mined overhead rate for the year is based on a cost formula that estimated $280.000 in manufactur ing overhead for an estimated allocation base of 7,000 camera-hours. The following transaction occurred during the year Film costumes, and similar raw materials puchased on account, $185.000 b. Fil Faces, and other raw materials used in production $300,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect Utility costs incurred d in the production stadio $72.000 Depreciation recorded on the stadio, cameras, and other equipment. $84,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment wed in marketing and administration Advertising expense incurred. $130,000 Costs for salaries and wages were incurred as follow Direct labor factors and directors). $82,000 Indirect labor carpenters to build sets costume designers, and so forth $110,000 $95,000 Prepaid insurance expired during the year. $7,000 (80 related to production of videos and 20% related to marketing and administrative activities) Miscellaneous marketing and administrative expenses incumed. 58.600. iStudio (manufacturing) overhead was applied to videos in production. The company used 7.250 camera-hours during the year. Job-Order Costing: Cost Flows and External Reporting Videos that cost $550,000 to produce according to their job cost sheets were transferred to the finished videos warehouse so await sale and shipmen Sales for the year sotaled $925,000 and were all on account. The total cost to produce these videos according to their job con sheets was 5600,000 Collections from cotomen during the year totaled $850,000 Payments to suppliers on account during the year, $500,000 payments to employees for salaries and wages, $285,000 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. Prepare new T-accounts as needed. Key entries to the letters (a) through (m) above. Compute the ending balance in each accoun 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? Make an entry in the T-accounts to close any balance in the Studio Overhead account to Cost of Goods Sold 4. Prepare a schedule of cost of goods manfactured. If done correctly, the cost of goods manufactured from your schedule should agree with which of the above transactions? 5. Prepare a schedule of cost of goods sold. If done correctly, the unadjusted cost of goods sold from your schedule should agree with which of the above transactions? 6 Prepare an income statement for the year. 137