Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The companys balance sheet accounts as of January 1, are given below. Supreme Videos, Inc. Balance Sheet January 1 Assets Current assets: Cash $ 77,000 Accounts receivable 116,000 Inventories: Raw materials (film, costumes) $ 44,000 Videos in process 22,000 Finished videos awaiting sale 95,000 161,000 Prepaid insurance 11,800 Total current assets 365,800 Studio and equipment 758,000 Less accumulated depreciation 224,000 534,000 Total assets $ 899,800 Liabilities and Stockholders' Equity Accounts payable $ 112,800 Capital stock $ 503,000 Retained earnings 284,000 787,000 Total liabilities and stockholders' equity $ 899,800 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 companys predetermined overhead rate for the year is based on a cost formula that estimated $200,000 in manufacturing overhead for an estimated allocation base of 5,000 camera-hours. The following transactions occurred during the year: Film, costumes, and similar raw materials purchased on account, $199,000. Film, costumes, and other raw materials used in production, $214,000 (75% of this material was considered direct to the videos in production, and the other 25% was considered indirect). Utility costs incurred on account in the production studio, $86,000. Depreciation recorded on the studio, cameras, and other equipment, $98,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. Advertising expense incurred on account, $144,000. Costs for salaries and wages were incurred on account as follows: Direct labor (actors and directors) $ 96,000 Indirect labor (carpenters to build sets, costume designers, and so forth) $ 124,000 Administrative salaries $ 109,000 Prepaid insurance expired during the year, $8,400 (70% related to production of videos, and 30% related to marketing and administrative activities). Miscellaneous marketing and administrative expenses incurred on account, $10,000. Studio (manufacturing) overhead was applied to videos in production. The company used 9,000 camera-hours during the year. Videos that cost $564,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment. Sales for the year totaled $953,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $614,000. Collections from customers during the year totaled $864,000. Payments to suppliers on account during the year, $514,000; payments to employees for salaries and wages, $321,000. Required: 1. Prepare a T-account for each account on the companys 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.