Star Videos, Inc.
Balance Sheet
January 1
Assets
Cash				$	74,800
Accounts receivable					112,400
Inventories:
Raw materials (film, costumes)	$	43,600
Videos in process		54,600
Finished videos awaiting sale		91,400			189,600
Prepaid insurance					11,850
Studio and equipment (net)					619,000
Total assets				$	1,007,650
Liabilities and Stockholders Equity
Accounts payable				$	238,000
Retained earnings					769,650
Total liabilities and stockholders equity				$	1,007,650

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 companys 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:

Film, costumes, and similar raw materials purchased on account, $198,000.

Film, costumes, and other raw materials issued to production, $236,500 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).

Utility costs incurred (on account) in the production studio, $95,400.

Depreciation recorded on the studio, cameras, and other equipment, $101,200. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.

Advertising expense incurred (on account), $146,000.

Salaries and wages paid in cash as follows:

Direct labor (actors and directors)	$	103,400
Indirect labor (carpenters to build sets, costume designers, and so forth)	$	70,000
Administrative salaries	$	112,400

Prepaid insurance expired during the year, $11,000 (70% related to production of videos, and 30% related to marketing and administrative activities).

Miscellaneous marketing and administrative expenses incurred (on account), $12,950.

Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.

Videos that cost $586,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.

Sales for the year totaled $1,114,000 and were all on account.

The total cost to produce the videos that were sold according to their job cost sheets was $632,470.

Collections from customers during the year totaled $1,064,000.

Payments to suppliers on account during the year, $614,000.

Underapplied or overapplied overhead $__?__.

Required:

1. Prepare a transaction analysis that records all of the above transactions. Calculate the ending balances at December 31 for all balance sheet accounts.

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.