Supreme Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, are given below. Supreme Videos, Incorporated Assets Current assets: Cash Balance Sheet January 1 $ 64,000 Accounts receivable Inventories: Videos in process 103,000 Raw materials (film, costumes) $ 31,000 46,000 Finished videos awaiting sale 82,000 159,000 Prepaid insurance 9,200 Total current assets 335,200 Studio and equipment 732,000 Less accumulated depreciation 211,000 521,000 $ Total assets 856,200 Equity Liabilities and Stockholders' Accounts payable $ 164,200 Capital stock Retained earnings $ 421,000 271,000 692,000 Total liabilities and $ stockholders' equity 856,200 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 $270,000 in manufacturing overhead for an estimated allocation base of 6,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $186,000. b. Film, costumes, and other raw materials used in production, $201,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered indirect). c. Utility costs incurred in the production studio, $73,000. d. Depreciation recorded on the studio, cameras, and other equipment, $85,000. 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, $131,000. f. Costs for salaries and wages were incurred as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $ 83,000 $ 111,000 $ 96,000 g. Prepaid insurance expired during the year, $7,100 (75% related to production of videos, and 25% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,700. i. Studio (manufacturing) overhead was applied to videos in production. The company used 6,800 camera-hours during the year. j. Videos that cost $551,000 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 $927,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $601,000. I. Collections from customers during the year totaled $851,000. m. Payments to suppliers on account during the year, $501,000; payments to employees for salaries and wages, $286,000. 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.