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. $ 89,000 107,600 Star Videos, Inc. Balance Sheet January 1 Assets Cash Accounts receivable Inventories: Raw materials (film, costumes) Videos in process 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 $ 10,600 50,600 91,800 153,000 10,000 583.000 $ 942,600 $ 216,000 726,600 $ 942,600 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, $190,000. b. Film, costumes, and other raw materials issued to production, $196,000 (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, $88,000. d. Depreciation recorded on the studio, cameras, and other equipment, $110,800. 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), $170,500. f. Salaries and wages paid in cash as follows: Direct labor (actors and directors) $ 92,800 Indirect labor (carpenters to build sets, costume designers, and so forth) $68,000 Administrative salaries $102,200 g. Prepaid insurance expired during the year, $7,900 (70% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account), $11,500. 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 $578,000 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 $1,016,000 and were all on account. 1. The total cost to produce the videos that were sold according to their job cost sheets was $623,910. m. Collections from customers during the year totaled $966,000. n. Payments to suppliers on account during the year, $537,000. o. Underapplied or overapplied overhead $_2 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 schedule of cost of goods sold for the year. Star Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31
