upreme 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 $ 70,000 Accounts receivable 109,000 Inventories: Raw materials (film, costumes) $ 37,000 Videos in process 52,000 Finished videos awaiting sale 88,000 177,000 Prepaid insurance 10,400 Total current assets 366,400 Studio and equipment 744,000 Less accumulated depreciation 217,000 527,000 Total assets $ 893,400 Liabilities and Stockholders' Equity Accounts payable $ 189,400 Capital stock $ 427,000 Retained earnings 277,000 704,000 Total liabilities and stockholders' equity $ 893,400 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 $240,000 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, $192,000. Film, costumes, and other raw materials used in production, $207,000 (80% of this material was considered direct to the videos in production, and the other 20% was considered indirect). Utility costs incurred on account in the production studio, $79,000. Depreciation recorded on the studio, cameras, and other equipment, $91,000. 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, $137,000. Costs for salaries and wages were incurred on account as follows: Direct labor (actors and directors) $ 89,000 Indirect labor (carpenters to build sets, costume designers, and so forth) $ 117,000 Administrative salaries $ 102,000 Prepaid insurance expired during the year, $7,700 (75% related to production of videos, and 25% related to marketing and administrative activities). Miscellaneous marketing and administrative expenses incurred on account, $9,300. Studio (manufacturing) overhead was applied to videos in production. The company used 7,000 camera-hours during the year. Videos that cost $557,000 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 $939,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $607,000. Collections from customers during the year totaled $857,000. Payments to suppliers on account during the year, $507,000; payments to employees for salaries and wages, $292,000. 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. 6. Prepare an income statement for the year.