"Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company?s balance sheet accounts as of January 1, the beginning of its fiscal year, are given below. SUPREME VIDEOS, INC. Balance Sheet January 1 Assets Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,000 Accounts receivable . . . . . . . . . . . . . . . . . . . . 102,000 Inventories: Raw materials (film, costumes) . . . . . . . . . $ 30,000 Videos in process . . . . . . . . . . . . . . . . . . . . 45,000 Finished videos awaiting sale . . . . . . . . . . . 81,000 156,000 Prepaid insurance . . . . . . . . . . . . . . . . . . . . . 9,000 Total current assets . . . . . . . . . . . . . . . . . . . . . . 330,000 Studio and equipment . . . . . . . . . . . . . . . . . . . . 730,000 Less accumulated depreciation . . . . . . . . . . . . . 210,000 520,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $850,000 Liabilities and Shareholders? Equity Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $160,000 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . $420,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 270,000 690,000 Total liabilities and shareholders? equity . . . . . . . $850,000 Since the videos differ in length and in complexity of production, the company uses a joborder costing system to determine the cost of each video produced. Studio (manufacturing) over- 120 Chapter 3 Systems Design: Job-Order Costing www.mcgrawhill.ca/college/garrison S Chapter 3 Systems Design: Job-Order Costing 121 head is charged to videos on the basis of camera-hours of activity. At the beginning of the year, the company estimated that it would work 7,000 camera-hours and incur $280,000 in studio overhead cost. The following transactions were recorded for the year: a. Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials issued to production, $200,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). c. Utility costs incurred in the production studio, $72,000. d. Depreciation recorded on the studio, cameras, and other equipment, $84,000. 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, $130,000. f. Costs for salaries and wages were incurred as follows: Direct labour (actors and directors) . . . . . . . . . . . . $82,000 Indirect labour (carpenters to build sets, costume designers, and so forth) . . . . . . . . . . . . $110,000 Administrative salaries . . . . . . . . . . . . . . . . . . . . . . $95,000 g. Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,600. 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 $550,000 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 totalled $925,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $600,000. l. Collections from customers during the year totalled $850,000. m. Payments to suppliers on account during the year, $500,000; payments to employees for salaries and wages, $285,000. 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. Prepare new T-accounts as needed. Key your entries to the letters (a) through (m) above. Find the ending balance in each account. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? Make an entry in the T-accounts to close any balance in the Studio Overhead account to Cost of Goods Sold. 4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the T-accounts.)"

Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, the beginning of its fiscal year, are given below. SUPREME VIDEOS, INC. Balance Sheet January 1 Assets Current assets: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . Inventories: Raw materials (film, costumes) . . . . . . . . . $ 30,000 Videos in process . . . . . . . . . . . . . . . . . . . . 45,000 Finished videos awaiting sale . . . . . . . . . . . 81,000 ________ Prepaid insurance . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . Studio and equipment . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . 730,000 210,000 __________ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,000 102,000 156,000 9,000 ________ 330,000 520,000 ________ $850,000 _________ _________ Liabilities and Shareholders' Equity Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders' equity . . . . . . . $160,000 $420,000 270,000 690,000 $850,000 ________ Since 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. At the beginning of the year, the company estimated that it would work 7,000 camera-hours and incur $280,000 in studio overhead cost. The following transactions were recorded for the year: a. Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials issued to production, $200,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). c. Utility costs incurred in the production studio, $72,000. d. Depreciation recorded on the studio, cameras, and other equipment, $84,000. 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, $130,000. f. Costs for salaries and wages were incurred as follows: Direct labour (actors and directors) . . . . . . . . . . . . $82,000 Indirect labour (carpenters to build sets, costume designers, and so forth) . . . . . . . . . . . . $110,000 Administrative salaries . . . . . . . . . . . . . . . . . . . . . . $95,000 g. Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,600. 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 $550,000 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 $925,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $600,000. l. Collections from customers during the year totalled $850,000. m. Payments to suppliers on account during the year, $500,000; payments to employees for salaries and wages, $285,000. 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. Prepare new T-accounts as needed. Key your entries to the letters (a) through (m) above. Find the ending balance in each account. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year? Make an entry in the T-accounts to close any balance in the Studio Overhead account to Cost of Goods Sold. 4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods manufactured; all of the information needed for the income statement is available in the T-accounts.)