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Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 are given below.
Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 are given below. Star Videos, Incorporated 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 nces Accounts payable Retained earnings Total liabilities and stockholders' equity $ 90,800 104,200 $ 26,400 51,000 87,800 165,200 8,550 568,000 $ 936,750 $ 244,000 692,750 $ 936,750 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, $214,000. b. Film, costumes, and other raw materials issued to production, $230,000 (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, $91,800. d. Depreciation recorded on the studio, cameras, and other equipment, $96.400. 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), $149,000. 1. 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 $ 90,400 $ 83,500 $113.200
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