Question

Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1, the beginning of its fiscal year, are given below:

  

Supreme Videos, Inc. Balance Sheet January 1
Assets
Current assets:
Cash		$82,000
Accounts receivable		121,000
Inventories:
Raw materials (film, costumes)	$49,000
Videos in process	22,000
Finished videos awaiting sale	100,000	171,000
Prepaid insurance		12,800
Total current assets		386,800
Studio and equipment	768,000
Less accumulated depreciation	229,000	539,000
Total assets		$925,800
Liabilities and Stockholders' Equity
Accounts payable		$128,800
Capital stock	$508,000
Retained earnings	289,000	797,000
Total liabilities and stockholders' equity		$925,800

  

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 is based on a cost formula that estimated $360,000 in manufacturing overhead for an estimated allocation base of 9,000 camera-hours. The following transactions were recorded for the year:

  

a.	Film, costumes, and similar raw materials purchased on account, $204,000.
b.	Film, costumes, and other raw materials issued to production, $219,000 (75% of this material was considered direct to the videos in production, and the other 25% was considered indirect).
c.	Utility costs incurred in the production studio, $91,000 for account.
d.	Depreciation recorded on the studio, cameras, and other equipment, $103,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.
e.	Advertising expense incurred, $149,000 for account.
f.	Costs for salaries and wages were incurred as follows:

  

Direct labor (actors and directors)	$	101,000
Indirect labor (carpenters to build sets,
costume designers, and so forth)	$	129,000
Administrative salaries	$	114,000

g.	Prepaid insurance expired during the year, $8,900 (70% related to production of videos, and 30% related to marketing and administrative activities).
h.	Miscellaneous marketing and administrative expenses incurred, $10,500 for account.
i.	Studio (manufacturing) overhead was applied to videos in production. The company recorded 9,500 camera-hours of activity during the year.
j.	Videos that cost $569,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
k.	Sales for the year totaled $963,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $619,000.
l.	Collections from customers during the year totaled $869,000.
m.	Payments to suppliers on account during the year, $519,000; payments to employees for salaries and wages, $326,000.

  

Required:
1&2.	Prepare a T-account for each account on the company’s balance sheet, and enter the beginning balances. Make an entry directly into the T-accounts for transactions (a) through (m).

Answer 1

Answer is given below

T- Accounts Beg Bal Cash $82,000 $869,000 Accounts Receivable Beg Bal $121,000 k $963,000 $869,000 End Bal $215,000 $519,000 m $326,000 m End Bal $106,000 Beg Bal $219,000 b Beg Bal Raw material $49,000 a $204,000 $34,000 Prepaid Insurance $12,800 $8,900 g End Bal End Bal $3,900 Beg Bal b Videos in Process $22,000 $569,000 į $164,250 $101,000 $380,000 $98,250 Finished Goods Beg Bal $100,000 j $569,000 $619,000 k End Bal $50,000 End Bal Beg Bal Studios and Equipment $768,000 Accumulated Depreciation $229,000 $103,000 d $332,000 Beg Bal End Bal End Bal $768,000 Studio Overhead Depreciation Beg Bal d $25,750 End Bal $25,750 Beg Bal $54,750 $380,000 i $91,000 9500 hours X $40/hr $77,250 $129,000 $6,230 Insurance OOO OO Beg Bal $_ $21,770 $2,670 $2,670 End Bal Beg Bal Advertising Expense $0 $149,000 $149,000 Miscellaneous Expense Beg Bal h $10,500 End Bal $10,500 e End Bal Administrative salaries expense Sales Account Beg Bal Beg Bal $114,000 $114,000 $0 $963,000 k $963,000 End Bal End Bal Beg Bal Beg Bal k Cost of Goods Sold $21,770 0 $619,000 $597,230 End Bal Accounts Payable $128,800 $204,000 a $91,000 $149,000 e $519,000 $10,500 h $64,300 m Beg Bal Salaries and Wages payable $0 $326,000 $344,000 f $18,000 m Capital Stock End Bal Beg Bal $508,000 End bal $508,000 Retained Earnings $289,000 Beg Bal End Bal $289,000 Predetermined Overhead rate Manufacturing Overhead Camera hours $350.00 $360,000 9,000 $40 per Camera hour per Camera hour