In: Accounting
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 | $ | 92,000 | |||
Accounts receivable | 115,600 | ||||
Inventories: | |||||
Raw materials (film, costumes) | $ | 17,800 | |||
Videos in process | 60,200 | ||||
Finished videos awaiting sale | 91,200 | 169,200 | |||
Prepaid insurance | 12,600 | ||||
Studio and equipment (net) | 603,000 | ||||
Total assets | $ | 992,400 | |||
Liabilities and Stockholders’ Equity | |||||
Accounts payable | $ | 211,000 | |||
Retained earnings | 781,400 | ||||
Total liabilities and stockholders’ equity | $ | 992,400 | |||
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 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:
Direct labor (actors and directors) | $ | 99,200 |
Indirect labor (carpenters to build sets, costume designers, and so forth) | $ | 100,500 |
Administrative salaries | $ | 102,400 |
Required:
1. Prepare a transaction analysis that records all of the above transactions.
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.