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 $ 81,800 Cash Accounts receivable 104,400 Inventories: $ 17,200 57,400 85,800 Raw materials (film, costumes) Videos in process 160,400 12,650 588,000 $ 947,250 Finished videos awaiting sale Prepaid insurance Studio and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Retained earnings Total liabilities and stockholders' equity $ 203,000 744, 250 $ 947, 250 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, $195,500. b. Film, costumes, and other raw materials issued to production, $209,500 (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, $85,800. d. Depreciation recorded on the studio, cameras, and other equipment, $106,000. 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), $175,000. f. Salaries and wages paid in cash as follows: $ 89,200 $ 82,500 Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $112,800 g. Prepaid insurance expired during the year, $9,950 (70% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account), $10,350. 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 $566,000 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 $1,000,000 and were all on account. I. The total cost to produce the videos that were sold according to their job cost sheets was $611,070. m. Collections from customers during the year totaled $950,000. n. Payments to suppliers on account during the year, $556,000. n. Payments to suppliers on account during the year, $556,000. 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
