Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1 are given below. Star Videos, Incorporated Balance Sheet January 1 Assets Cash $ 83,400 Accounts receivable 114,600 Inventories: Raw materials (film, costumes) $ 33,600 Videos in process 58,600 Finished videos awaiting sale 97,400 189,600 Prepaid insurance 9,100 Studio and equipment (net) 582,000 Total assets $ 978,700 Liabilities and Stockholders’ Equity Accounts payable $ 219,000 Retained earnings 759,700 Total liabilities and stockholders’ equity $ 978,700 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 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 f
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company’s
| Star Videos, Incorporated | ||
| Balance Sheet | ||
| January 1 | ||
| Assets | ||
| Cash | $ 83,400 | |
|---|---|---|
| 114,600 | ||
| Inventories: | ||
| Raw materials (film, costumes) | $ 33,600 | |
| Videos in process | 58,600 | |
| Finished videos awaiting sale | 97,400 | 189,600 |
| Prepaid insurance | 9,100 | |
| Studio and equipment (net) | 582,000 | |
| Total assets | $ 978,700 | |
| Liabilities and |
||
| Accounts payable | $ 219,000 | |
| 759,700 | ||
| Total liabilities and stockholders’ equity | $ 978,700 |
Because the videos differ in length and complexity of production, the company uses a
- Film, costumes, and similar raw materials purchased on account, $210,000.
- Film, costumes, and other raw materials issued to production, $234,500 (85% of this material was direct to the videos in production, and the other 15% was indirect).
- Utility costs incurred (on account) in the production studio, $78,400.
Depreciation on the studio, cameras, and other equipment, $86,800. 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), $154,500.
- Salaries and wages paid in cash as follows:
Direct labor (actors and directors) $ 102,200 Indirect labor (carpenters to build sets, costume designers, and so forth) $ 89,500 Administrative salaries $ 114,000 - Prepaid insurance expired, $8,700 (70% related to production of videos, and 30% related to marketing and administrative activities).
- Miscellaneous marketing and administrative expenses incurred (on account), $11,450.
- Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity.
- Videos costing $554,000 were transferred to the finished videos warehouse.
- Sales for the year totaled $1,026,000 and were all on account.
- The total cost to produce the videos that were sold was $598,230.
- Collections from customers totaled $976,000.
- Payments to suppliers on account, $592,000.
- Underapplied or overapplied overhead $__
Required:
Prepare a transaction analysis that records all of the above transactions.
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