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 $ 87,400 107,200 Accounts receivable Inventories: $15,800 54,600 94,400 Raw materials (film, costumes) videos in process Finished videos awaiting sale Prepaid insurance Studio and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts Retained earnings Total liabilities and stockholders' equity 164,800 11,150 582,000 952,550 $ 231,000 21,550 952,550 payable 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 ($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, $199,000 b. Film, costumes, and other raw materials issued to production, $207,000 (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, $78,800. d. Depreciation recorded on the studio, cameras, and other equipment, $114,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred (on account), $179,000. f. Salaries and wages paid in cash as follows: Direct labor (actors and directors) $ 91,200 $ 83,500 $112,200 Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries g. Prepaid insurance expired during the year, $9,300 (70% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account), $10,650. i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year j. Videos that cost $538,000 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 $948,000 and were all on account. The total cost to produce the videos that were sold according to their job cost sheets was $581,110. m. Collections from customers during the year totaled $898,000. n. Payments to suppliers on account during the year, $584,000. o. 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. Prepare a transaction analysis that records all of the above transactions. (Amounts to be deducted should be indicated by a minus sign.) Transaction Analysis For the Year Ended December 31 Studio & Insurance Equipment Accounts Payable Finished Manufacturing Prepaid Retained Cash Receivable Raw Materials Videos in Goods 94,400 Beginning balance 1/1 (a) Raw material purchases b) Raw materia's used (c) Utity costs (d) Depreciation charges (e) Advertising ) Salaries & wages (g) Prepaid insurance h) Mscelaneous marketing 87.400 107.200 S 15,800 54.600S 11,150|$ 582,000-| $ 231,000 |S 721,550 Applied overhead | Transfer completed videos to finished goods k) Sales 1) Transfer finished goods to cost of goods sold m) Cash collections from customers (n) Payment to suppliers Ending balances 12/31 Star Videos, Inc Schedule of Cost of Goods Manufactured For the Year Ended December 31 Total manufacturing costs Cost of goods manufactured Prepare a schedule of cost of goods sold for the year. Star Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31 Prepare an income statement for the year. Star Videos, Inc. Income Statement For the Year Ended December 31
