Supreme Videos, Incorporated, produces short musical videos for sale to retail outlets. The companys balance sheet accounts as of January 1, are given below.

Supreme Videos, Incorporated 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 Stockholders' Equity
Accounts payable		$ 160,000
Capital stock	$ 420,000
Retained earnings	270,000	690,000
Total liabilities and stockholders' equity		$ 850,000

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 companys predetermined overhead rate for the year is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. The following transactions occurred during the year:

Film, costumes, and similar raw materials purchased on account, $185,000.

Film, costumes, and other raw materials used in production, $200,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).

Utility costs incurred in the production studio, $72,000.

Depreciation recorded on the studio, cameras, and other equipment, $84,000. 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, $130,000.

Costs for salaries and wages were incurred as follows:

Direct labor (actors and directors)	$ 82,000
Indirect labor (carpenters to build sets, costume designers, and so forth)	$ 110,000
Administrative salaries	$ 95,000

Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities).

Miscellaneous marketing and administrative expenses incurred, $8,600.

Studio (manufacturing) overhead was applied to videos in production. The company used 7,250 camera-hours during the year.

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.

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.

Collections from customers during the year totaled $850,000.

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 companys balance sheet and enter the beginning balances.

2. Record the transactions directly into the T-accounts.

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.