Question

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

Supreme Videos, Inc. Balance Sheet January 1
Assets
Current assets:
Cash				$	77,000
Accounts receivable					116,000
Inventories:
Raw materials (film, costumes)	$	44,000
Videos in process		22,000
Finished videos awaiting sale		95,000			161,000
Prepaid insurance					11,800
Total current assets					365,800
Studio and equipment		758,000
Less accumulated depreciation		224,000			534,000
Total assets				$	899,800
Liabilities and Stockholders' Equity
Accounts payable				$	112,800
Capital stock	$	503,000
Retained earnings		284,000			787,000
Total liabilities and stockholders' equity				$	899,800

  

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 $200,000 in manufacturing overhead for an estimated allocation base of 5,000 camera-hours. The following transactions occurred during the year:

1. Film, costumes, and similar raw materials purchased on account, $199,000.
2. Film, costumes, and other raw materials used in production, $214,000 (75% of this material was considered direct to the videos in production, and the other 25% was considered indirect).
3. Utility costs incurred on account in the production studio, $86,000.
4. Depreciation recorded on the studio, cameras, and other equipment, $98,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration.
5. Advertising expense incurred on account, $144,000.
6. Costs for salaries and wages were incurred on account as follows:

Direct labor (actors and directors)	$	96,000
Indirect labor (carpenters to build sets, costume designers, and so forth)	$	124,000
Administrative salaries	$	109,000

7. Prepaid insurance expired during the year, $8,400 (70% related to production of videos, and 30% related to marketing and administrative activities).
8. Miscellaneous marketing and administrative expenses incurred on account, $10,000.
9. Studio (manufacturing) overhead was applied to videos in production. The company used 9,000 camera-hours during the year.
10. Videos that cost $564,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
11. Sales for the year totaled $953,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $614,000.
12. Collections from customers during the year totaled $864,000.
13. Payments to suppliers on account during the year, $514,000; payments to employees for salaries and wages, $321,000.

Required:

1. Prepare a T-account for each account on the company’s balance sheet and enter the beginning balances.

2. Record the transactions directly into the T-accounts. Key your entries to the letters (a) through (m) above.

3. Is the Studio (manufacturing) Overhead account underapplied or overapplied for the year?

4. Prepare a schedule of cost of goods manufactured.

5. Prepare a schedule of cost of goods sold.

6. Prepare an income statement for the year.

Answer 1

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General - Wrap Text Merge & Center 1 1 - 3 Autosum * Calibri - 11 - AA BI U - ->-A Font Paste Insert Delete Format Conditional Format Formatting as Table Styles Format Painter Clipboard Cell Styles 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 - fe А D E F G H I J Balance b/d Accounts Receivable Total Supreme Video Inc. Cash Account $ $ $ 77,000.00 Salaries and Wages 8,64,000.00 Balance C/d 9,41,000.00 $ $ $ 8,35,000.00 1,06,000.00 9,41,000.00 Balance b/d Sales Total Accounts Receivable $ $ $ 1,16,000.00 Cash 9,53,000.00 Balance C/d 10,69,000.00 $ $ $ 8,64,000.00 2,05,000.00 10,69,000.00 Merchandise Inventory $ Balance b/d Accounts Payable Total 44,000.00 By Video in Process 1,99,000.00 Balance C/d 2,43,000.00 $ $ $ 2,14,000.00 29,000.00 2,43,000.00 $ Prepaid Insurance $ Balance b/d $ 11,800.00 By Insurance Balance C/d 11,800.00 8,400.00 3,400.00 11,800.00 Total $ $ Video in Process $ 5,64,000.00 Balance b/d Sheet9 Sheet10 22,000.00 Finished Goods Sheet17 Sheet18 H- L ADDARE 1 CACAO Sheet11 Sheet12 Sheet13 Sheet14 Sheet15 Sheet16 Ready 100% OO OPA 0 17:44 14-02-2020 ENG

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View AutoSum - A * Cut Copy ♡ General 1 D - Wrap Text Merge & Center *- AutoSum" AT A LE Paste Format Painter Clipboard Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells - fie K66 Α C D F G H I J Video in Process 64 65 66 $ $ 5,64,000.00 74,500.00 Balance b/d Merchandise Inventory($214000*75%) Direct Labor Overhead 22,000.00 Finished Goods 1,60,500.00 Balance C/d 96,000.00 3,60,000.00 $ $ Total $ 6,38,500.00 $ 6,38,500.00 Studio and Equipment $ Balance b/d 7,58,000.00 By Balance C/d $ 7,58,000.00 Total $ 7,58,000.00 $ 7,58,000.00 Balance b/d Video in Process Total Finished Goods $ $ $ 95,000.00 By Cost of good sold 5,64,000.00 By Balance C/d 6,59,000.00 $ $ $ 6,14,000.00 45,000.00 6,59,000.00 85 To Balance C/d Accumulated Depreciation $ 3,22,000.00 By Balance b/d By Depreciation 2.000 on! Sheet14_Sheet15 Sheet16 Sheet17 Sheet18 $ $ 2,24,000.00 98,000.00 86 ITotal K Sheet Sheet10 Sheet11 Sheet12 Sheet13 ™ Ready 100% OO OPA 0 17:44 14-02-2020 ENG 0

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General AutoSum - A 1 1 - Wrap Text Merge & Center - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 A F G H I J 84 85 To Balance c/d с Accumulated Depreciation $ 3,22,000.00 By Balance b/d By Depreciation $ 3,22,000.00 $ $ $ 2,24,000.00 98,000.00 3,22,000.00 Total Studio Overhead $ 3,60,000.00 Indirect Material($214000*25%) Utility Expenses Depreciation($98000*3/4) Indirect Labor Prepaid Insurance($8400*70%) To Cost of goods sold Total $ $ $ $ $ $ 53,500.00 By Video in Process 86,000.00 73,500.00 1,24,000.00 5,880.00 17,120.00 3,60,000.00 $ 3,60,000.00 Depreciation Expense $ To Accumulated Depreciation($98000*1/4) 24,500.00 By Balance C/d $ 24,500.00 101 Total $ 24,500.00 24,500.00 102 103 104 Insurance Expense $ To Prepaid Insurance($8400*30%) 2,520.00 By Balance C/d $ 2,520.00 105 106 2,520.00 $ 2,520.00 107 Total Sheet9 Sheet10 Sheet11 Sheet12 Sheet13 Sheet14 Sheet15 Sheet16 Sheet17 Sheet18 ] REN Ready 100% 0 OO OPA ENG 17:44 14-02-2020 a

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 А E F G H I J 108 с Advertisement Expense $ 1,44,000.00 By Balance C/d 109 To Accounts Payable $ 1,44,000.00 Total $ 1,44,000.00 $ 1,44,000.00 110 111 112 113 114 Miscellaneous Expense $ To Accounts Payable 10,000.00 By Balance C/d $ 10,000.00 115 116 117 Total $ 10,000.00 $ 10,000.00 119 Administrative Salaries Expense $ 1,09,000.00 By Balance C/d To Accounts Payable $ 1,09,000.00 120 121 122 |10.000 yalancaclo : 120.000 Total $ 1,09,000.00 $ 1,09,000.00 123 Sales To Balance C/d $ 9,53,000.00 By Accounts Receivable $ 9,53,000.00 126 Total $ 9,53,000.00 $ 9,53,000.00 Cost of goods sold $ Cost of goods sold To Finished Goods 129 130 6,14,000.00 By Studio in Process By Balance C/d 1000 on Sheet17 Sheet18 $ $ 17,120.00 5,96,880.00 K Sheet Sheet10 Sheet11 Sheet12 Sheet13 Sheet14_Sheet15 Sheet16 ™ Ready 100% OO OPA 0 17:44 14-02-2020 ENG 0 .

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 А C F G H I J 128 Cost of goods sold $ 129 To Finished Goods 130 6,14,000.00 By Studio in Process By Balance C/d 6,14,000.00 $ $ $ 17,120.00 5,96,880.00 6,14,000.00 131 Total $ 132 133 134 135 To Finished Goods To Balance C/d Accounts Payable $ $ 5,14,000.00 By Balance b/d 37,800.00 By Merchandise Inventory By Studio Overhead By Advertisement Expense By Miscellaneous Expense $ $ $ $ $ 1,12,800.00 1,99,000.00 86,000.00 1,44,000.00 10,000.00 137 138 139 140 Total $ 5,51,800.00 $ 5,51,800.00 Salaries & Wages Payable By Salaries and Wages $ 3,21,000.00 Expense $ 8,000.00 $ 3,29,000.00 $ To Cash To Balance C/d Total 3,29,000.00 145 $ 3,29,000.00 146 147 148 To Balance C/d Capital Stock $ Sheet15 Sheet16 $ 149 150 ► Ready 5,03,000.00 5,03,000.00 By Balance B/d Sheet17 Sheet18 Sheet9 Sheet10 Sheet11 Sheet12 Sheet13 Sheet14 | OO ^ 100% ve ENG 0 17:45 gl O 14-02-2020

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General AutoSum - A 1 1 - Wrap Text Merge & Center - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 А D E F G H I J 148 Capital Stock 149 To Balance C/d $ 5,03,000.00 By Balance B/d $ 5,03,000.00 150 151 Retained Earnings $ To Balance C/d 2,84,000.00 By Balance B/d $ 2,84,000.00 155 Overhead is over applied by $17120 transferred to cost of goods sold Supreme Video Inc. Cost of Goods manuafactured 159 Amount 162 163 164 165 166 $ $ $ $ 44,000.00 1,99,000.00 2,43,000.00 -29,000.00 Direct Material Beginning Raw Material Inventory Add: Purchases Total raw material available Less: Ending Raw Material Total raw material available Raw Material used in Production($214000*75%) Direct Labor Manuafcturing Overhead Indirect Material Indirect labor Sheet9 Sheet10 Sheet11 Sheet12 Sheet13 167 168 2,14,000.00 1,60,500.00 96,000.00 169 170 171 ™ Ready $ $ Sheet16 53,500.00 12,000 on Sheet17 Sheet18 K Sheet14 Sheet15 Đ OD OP ^ 100% ve ENG 0 17:45 - o 14-02-2020

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut ♡ General 1 - Wrap Text Merge & Center 1 - 3 Autosum * Paste Calibri - 11 - AA BI U - ->-A Font E Copy Format Painter Clipboard Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 fx А в E F G H J 157 158 Supreme Video Inc. Cost of Goods manuafactured 159 260 Amount 162 163 164 165 $ $ $ $ 44,000.00 1,99,000.00 2,43,000.00 -29,000.00 166 $ 167 168 169 2,14,000.00 1,60,500.00 96,000.00 170 171 Direct Material Beginning Raw Material Inventory Add: Purchases Total raw material available Less: Ending Raw Material Total raw material available Raw Material used in Production ($214000*75%) Direct Labor Manuafcturing Overhead Indirect Material Indirect Labor Utilties:Plant Depreciation: Plant & Equipment Other Total Manufacturing Overhead Total Manufacturing Cost Add: Work in Process January 1st, Total Less: Work in Process Ending Dec 31st Cost of goods manufactured Sheet Sheet10 Sheet11 Sheet12 Sheet13 172 $ $ $ $ $ 53,500.00 1,24,000.00 86,000.00 73,500.00 23,000.00 173 174 175 176 177 178 179 180 ™ Ready 3,60,000.00 6,16,500.00 22,000.00 6,38,500.00 -74,500.00 5.64.000.00 K Sheet14 Sheet15 Sheet16 Sheet17 Sheet18 OD 100% 0 Đ A 17:45 1 ENG 14-02-2020 W

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells K66 А F G H I J 179 180 Less: Work in Process Ending Dec 31st Cost of goods manufactured -74,500.00 5,64,000.00 181 Supreme Video Inc. Cost of goods sold 184 185 186 Beginning Finished goods Inventory=(A) Add: Cost of goods manufactured=(B) Cost of goods avaialable for sale(C)=(A)+(B) Less: Ending Finished goods Inventory=(D) Unadjusted cost of goods sold Less: Overapplied Overhead Adjusted cost of goods sold Amount $ 95,000.00 $ 5,64,000.00 $ 6,59,000.00 $ 45,000.00 $ 6,14,000.00 $ -17,120.00 $ 5,96,880.00 189 190 Supreme Video Inc. Income Statement 193 194 195 196 197 198 9,53,000.00 -5,96,880.00 3,56,120.00 Sales of Video Less: Cost of good sold Gross Margin Selling and Administrative Expense: Depreciation Expense Advertising Expense Administrative Salaries Insurance Expense Miscellaneous Evnence Sheet9 Sheet10 Sheet11 Sheet12 199 200 201 202 ™ Ready $ $ $ $ Ś Sheet16 24,500.00 1,44,000.00 1,09,000.00 2,520.00 10 non on S Sheet17 Sheet18 K Sheet13 Sheet14_Sheet15 29n non nol L Đ OD OP ^ 100% ve ENG 0 17:45 O 14-02-2020

job order and process costing - Microsoft Excel - X Home Insert Page Layout Formulas Data Review View * Cut Copy ♡ General 1 - Wrap Text Merge & Center 1 - 3 LE Paste Format Painter Clipboard Autosum * Calibri - 11 - AA BI U - ->-A Font Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format 2 Clear Sort & Find & Filter Select Editing Alignment Number Cells fic K66 А D E F G H I J 181 182 Supreme Video Inc. Cost of goods sold 184 185 186 187 188 Beginning Finished goods Inventory=(A) Add: Cost of goods manufactured=(B) Cost of goods avaialable for sale(C)=(A)+(B) Less: Ending Finished goods Inventory=(D) Unadjusted cost of goods sold Less: Overapplied Overhead Adjusted cost of goods sold Amount $ 95,000.00 $ 5,64,000.00 $ 6,59,000.00 $ 45,000.00 $ 6,14,000.00 $ -17,120.00 $ 5,96,880.00 189 190 191 192 Supreme Video Inc. Income Statement 195 196 9,53,000.00 -5,96,880.00 3,56,120.00 199 Sales of Video Less: Cost of good sold Gross Margin Selling and Administrative Expense: Depreciation Expense Advertising Expense Administrative Salaries Insurance Expense Miscellaneous Expense Net Operating Income 200 $ $ $ $ $ 24,500.00 1,44,000.00 1,09,000.00 2,520.00 10,000.00 202 202 $ 2,90,020.00 66,100.00 203 20 K Sheet9 Sheet10 Sheet11 Sheet12 Sheet13 Sheet14 Sheet15 Sheet16 Sheet17 Sheet18 1 ™ Ready Đ OD ^ 100% ve ENG 0 17:45 gl 14-02-2020