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 $ 84,000 Accounts receivable 123,000 Inventories: Raw materials (film, costumes) $ 51,000 Videos in process 20,000 Finished videos awaiting sale 102,000 173,000 Prepaid insurance 13,200 Total current assets 393,200 Studio and equipment 772,000 Less accumulated depreciation 231,000 541,000 Total assets $ 934,200 Liabilities and Stockholders' Equity Accounts payable $ 133,200 Capital stock $ 510,000 Retained earnings 291,000 801,000 Total liabilities and stockholders' equity $ 934,200

Because the videos differ in length and 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 based on camera-hours of activity. The companys predetermined overhead rate for the year is based on a cost formula that estimated $225,000 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, $206,000.
2. Film, costumes, and other raw materials used in production, $221,000 (85% of this material was direct to the videos in production, and the other 15% was indirect).
3. Utility costs incurred in the production studio, $93,000.
4. Depreciation on the studio, cameras, and other equipment, $105,000. 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, $151,000.
6. Costs for salaries and wages were incurred as follows:

Direct labor (actors and directors)	$ 103,000
Indirect labor (carpenters to build sets, costume designers, and so forth)	$ 131,000
Administrative salaries	$ 116,000

1. Prepaid insurance expired during the year, $9,100 (80% related to production of videos, and 20% related to marketing and administrative activities).
2. Miscellaneous marketing and administrative expenses incurred, $10,700.
3. Studio (manufacturing) overhead was applied to videos in production. The company used 8,000 camera-hours during the year.
4. Videos that cost $571,000 to produce were transferred to the finished videos warehouse.
5. Sales for the year totaled $967,000 and were all on account. The total cost to produce these videos was $621,000.
6. Collections from customers during the year totaled $871,000.
7. Payments to suppliers on account during the year, $521,000; payments to employees for salaries and wages, $328,000.

Required:

1. Prepare a T-account for each account on the companys balance sheet and enter the beginning balances.
2. Record the transactions in the T-accounts. Key your entries to the letters (a) through (m) above.
3. Is the Studio (manufacturing) Overhead account underapplied or overapplied? 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.