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				$	80,000
Accounts receivable					119,000
Inventories:
Raw materials (film, costumes)	$	47,000
Videos in process		20,000
Finished videos awaiting sale		98,000			165,000
Prepaid insurance					12,400
Total current assets					376,400
Studio and equipment		764,000
Less accumulated depreciation		227,000			537,000
Total assets				$	913,400
Liabilities and Stockholders' Equity
Accounts payable				$	120,400
Capital stock	$	506,000
Retained earnings		287,000			793,000
Total liabilities and stockholders' equity				$	913,400

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 $230,000 in manufacturing overhead for an estimated allocation base of 5,000 camera-hours. The following transactions occurred during the year:

1. Film, costumes, and similar raw materials purchased on account, $202,000.
2. Film, costumes, and other raw materials used in production, $217,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).
3. Utility costs incurred on account in the production studio, $89,000.
4. Depreciation recorded on the studio, cameras, and other equipment, $101,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration.
5. Advertising expense incurred on account, $147,000.
6. Costs for salaries and wages were incurred on account as follows:

Direct labor (actors and directors)	$	99,000
Indirect labor (carpenters to build sets, costume designers, and so forth)	$	127,000
Administrative salaries	$	112,000

1. Prepaid insurance expired during the year, $8,700 (80% related to production of videos, and 20% related to marketing and administrative activities).
2. Miscellaneous marketing and administrative expenses incurred on account, $10,300.
3. Studio (manufacturing) overhead was applied to videos in production. The company used 7,800 camera-hours during the year.
4. Videos that cost $567,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
5. Sales for the year totaled $959,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $617,000.
6. Collections from customers during the year totaled $867,000.
7. Payments to suppliers on account during the year, $517,000; payments to employees for salaries and wages, $324,000.

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?

4. Prepare a schedule of cost of goods manufactured.

5. Prepare a schedule of cost of goods sold.