*COULD YOU ANSWER #4* Star Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1 are given below. Star Videos, Inc. Balance Sheet January 1 Assets Cash $ 88,000 Accounts receivable 114,600 Inventories: Raw materials (film, costumes) $ 20,000 Videos in process 51,800 Finished videos awaiting sale 97,200 169,000 Prepaid insurance 10,750 Studio and equipment (net) 598,000 Total assets $ 980,350 Liabilities and Stockholders’ Equity Accounts payable $ 189,000 Retained earnings 791,350 Total liabilities and stockholders’ equity $ 980,350 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 ($40 per camera-hour) is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. Any underapplied or overapplied overhead is closed to cost of goods sold. The following transactions were recorded for the year: Film, costumes, and similar raw materials purchased on account, $189,500. Film, costumes, and other raw materials issued to 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 (on account) in the production studio, $93,800. Depreciation recorded on the studio, cameras, and other equipment, $112,400. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration. Advertising expense incurred (on account), $153,000. Salaries and wages paid in cash as follows: Direct labor (actors and directors) $ 102,800 Indirect labor (carpenters to build sets, costume designers, and so forth) $ 71,500 Administrative salaries $ 97,800 Prepaid insurance expired during the year, $8,550 (70% related to production of videos, and 30% related to marketing and administrative activities). Miscellaneous marketing and administrative expenses incurred (on account), $11,700. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year. Videos that cost $586,000 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 $998,000 and were all on account. The total cost to produce the videos that were sold according to their job cost sheets was $632,470. Collections from customers during the year totaled $948,000. Payments to suppliers on account during the year, $538,000. Underapplied or overapplied overhead $__?__. Required: 1. Prepare a transaction analysis that records all of the above transactions. Calculate the ending balances at December 31 for all balance sheet accounts. 2. Prepare a schedule of cost of goods manufactured for the year. 3. Prepare a schedule of cost of goods sold for the year. 4. Prepare an income statement for the year.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
*COULD YOU ANSWER #4*
Star Videos, Inc., produces short musical videos for sale to retail outlets. The company’s
| Star Videos, Inc. | |||||
| Balance Sheet | |||||
| January 1 | |||||
| Assets | |||||
| Cash | $ | 88,000 | |||
| 114,600 | |||||
| Inventories: | |||||
| Raw materials (film, costumes) | $ | 20,000 | |||
| Videos in process | 51,800 | ||||
| Finished videos awaiting sale | 97,200 | 169,000 | |||
| Prepaid insurance | 10,750 | ||||
| Studio and equipment (net) | 598,000 | ||||
| Total assets | $ | 980,350 | |||
| Liabilities and |
|||||
| Accounts payable | $ | 189,000 | |||
| 791,350 | |||||
| Total liabilities and stockholders’ equity | $ | 980,350 | |||
|
|
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)
- Film, costumes, and similar raw materials purchased on account, $189,500.
- Film, costumes, and other raw materials issued to 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 (on account) in the production studio, $93,800.
Depreciation recorded on the studio, cameras, and other equipment, $112,400. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.- Advertising expense incurred (on account), $153,000.
- Salaries and wages paid in cash as follows:
| Direct labor (actors and directors) | $ | 102,800 |
| Indirect labor (carpenters to build sets, costume designers, and so forth) | $ | 71,500 |
| Administrative salaries | $ | 97,800 |
- Prepaid insurance expired during the year, $8,550 (70% related to production of videos, and 30% related to marketing and administrative activities).
- Miscellaneous marketing and administrative expenses incurred (on account), $11,700.
- Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
- Videos that cost $586,000 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 $998,000 and were all on account.
- The total cost to produce the videos that were sold according to their job cost sheets was $632,470.
- Collections from customers during the year totaled $948,000.
- Payments to suppliers on account during the year, $538,000.
- Underapplied or overapplied overhead $__?__.
Required:
1. Prepare a transaction analysis that records all of the above transactions. Calculate the ending balances at December 31 for all balance sheet accounts.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Prepare a schedule of cost of goods sold for the year.
4. Prepare an income statement for the year.
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