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 Cash $ 82,600 Accounts receivable 104,400 Inventories: Raw materials (film, costumes) $ 47,600 Videos in process 49,600 I Finished videos awaiting sale 96, 200 193,400 Prepaid insurance 10,900 Studio and equipment (net) 534,000 Total assets $ 925,300 Liabilities and Stockholders' Equity Accounts payable $ 162,000 Retained earnings 763,300 Total liabilities and stockholders' equity $.925, 300 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, $191,000. b. Film, costumes, and other raw materials issued to production, $229,000 (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, $78,000. d. Depreciation recorded on the studio, cameras, and other equipment, $98,000. 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) $179,500. f. Salaries and wages paid in cash as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $ 98,800 $88,500 $ 95,000 9. Prepaid insurance expired during the year, $9,400 (70% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account). $12,100. 1. 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 $1,018,000 and were all on account. 1. 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 $968,000. n. Payments to suppliers on account during the year, $600,000. 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
