Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, are given below. $ 73,000 112,000 Supreme Videos, Inc. Balance Sheet January 1 Assets Current assets: Cash Accounts receivable Inventories: Raw materials (film, costumes) $ 40,000 Videos in process 32,000 Finished videos awaiting sale 91,000 Prepaid insurance Total current assets Studio and equipment 750,000 Less accumulated depreciation 220,000 Total assets Liabilities and Stockholders' Equity Accounts payable Capital stock $430,000 Retained earnings 280,000 Total liabilities and stockholders' equity 163,000 11,000 359,000 530,000 $889,000 $179,000 710,000 $889,000 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 is based on a cost formula that estimated $250,000 in manufacturing overhead for an estimated allocation base of 5,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $195,000. b. Film, costumes, and other raw materials used in production, $210,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered Indirect). c. Utility costs incurred on account in the production studio, $82,000. d. Depreciation recorded on the studio, cameras, and other equipment, $94,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense Incurred on account, $140,000. f. Costs for salaries and wages were incurred on account as follows: $ 92,000 Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $120,000 $105,000 g. Prepaid insurance expired during the year, $8,000 (75% related to production of videos, and 25% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred on account, $9,600. I. Studio (manufacturing) overhead was applied to videos in production. The company used 7,000 camera-hours during the year. j. Videos that cost $560,000 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 $945,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $610,000. I. Collections from customers during the year totaled $860,000. m. Payments to suppliers on account during the year, $510,000; payments to employees for salaries and wages, $301,000. Required: 1. Prepare a T-account for each account on the company's balance sheet and enter the beginning balances. 2. Record the transactions directly into the T-accounts. Key your entries to the letters (a) through (m) above. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? By how much? 4. Prepare a schedule of cost of goods manufactured. 5. Prepare a schedule of cost of goods sold. 6. Prepare an income statement for the year. Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, are given below. $ 73,000 112,000 Supreme Videos, Inc. Balance Sheet January 1 Assets Current assets: Cash Accounts receivable Inventories: Raw materials (film, costumes) $ 40,000 Videos in process 32,000 Finished videos awaiting sale 91,000 Prepaid insurance Total current assets Studio and equipment 750,000 Less accumulated depreciation 220,000 Total assets Liabilities and Stockholders' Equity Accounts payable Capital stock $430,000 Retained earnings 280,000 Total liabilities and stockholders' equity 163,000 11,000 359,000 530,000 $889,000 $179,000 710,000 $889,000 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 is based on a cost formula that estimated $250,000 in manufacturing overhead for an estimated allocation base of 5,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $195,000. b. Film, costumes, and other raw materials used in production, $210,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered Indirect). c. Utility costs incurred on account in the production studio, $82,000. d. Depreciation recorded on the studio, cameras, and other equipment, $94,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense Incurred on account, $140,000. f. Costs for salaries and wages were incurred on account as follows: $ 92,000 Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $120,000 $105,000 g. Prepaid insurance expired during the year, $8,000 (75% related to production of videos, and 25% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred on account, $9,600. I. Studio (manufacturing) overhead was applied to videos in production. The company used 7,000 camera-hours during the year. j. Videos that cost $560,000 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 $945,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $610,000. I. Collections from customers during the year totaled $860,000. m. Payments to suppliers on account during the year, $510,000; payments to employees for salaries and wages, $301,000. Required: 1. Prepare a T-account for each account on the company's balance sheet and enter the beginning balances. 2. Record the transactions directly into the T-accounts. Key your entries to the letters (a) through (m) above. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? By how much? 4. Prepare a schedule of cost of goods manufactured. 5. Prepare a schedule of cost of goods sold. 6. Prepare an income statement for the year