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.

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.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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.

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