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 Accounts receivable Inventories: $ 77,000 116,000 Raw materials (film, costumes) 44,000 22,000 95,000 Videos in process Finished videos awaiting sale 161,000 11,800 365,800 Prepaid insurance Total current assets Studio and equipment 758,000 Less accumulated depreciation Total assets 24,0 534,886 $899,800 Liabilities and Stockholders' Equity Accounts payable Capital stock Retained earnings Total liabilities and stockholders' equity $112,800 $503,000 284,800 787,000 $899,806e 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:

Answer 1

1 & 2. Cash:

Beginning	77,000	m.	835,000
l.	864,000
Ending	106,000

Raw Materials:

Beginning	44,000	b.	214,000
a.	199,000
Ending	29,000

Videos in Process:

Beginning	22,000	j.	564,000
b.	160,500
f.	96,000
i.	360,000
Ending	74,500

Finished Videos:

Beginning	95,000	k.	614,000
j.	564,000
Ending	45,000

Cost of Videos Sold:

k.	614,000

Studio ( Manufacturing ) Overhead ;

b.	53,500	i.	360,000
c.	86,000
d.	73,500
f.	124,000
g.	5,880
Over-applied	17,120

Accounts Receivable:

Beginning	116,000	l.	864,000
k.	953,000
Ending	205,000

Prepaid Insurance:

Beginning	11,800	g.	8,400
Ending	3,400

Accounts Payable:

m.	835,000	Beginning	112,800
		a.	199,000
		c.	86,000
		e.	144,000
		f.	329,000
		h.	10,000
		Ending	45,800

3. Studio Overhead account over-applied by $ 17,120.

4.

Supreme Videos Inc. Schedule of Cost of Goods Manufactured For the year ended December 31
	$	$
Beginning Videos in Process		22,000
Add: Manufacturing Costs
Raw Materials	160,500
Direct Labor	96,000
Manufacturing Overhead Applied	360,000	616,500
Total cost of Videos in Process		638,500
Less: Ending Videos in Process		74,500
Cost of Goods Manufactured		564,000

5.

Supreme Videos Inc. Schedule of Cost of Goods Sold For the year ended December 31
Beginning finished videos	95,000
Add: Cost of Goods Manufactured	564,000
Cost of Videos Available for Sale	659,000
Less: Ending finished videos	(45,000)
Cost of Goods Sold ( Unadjusted)	614,000
Less: Manufacturing Overhead Over-applied	(17,120)
Cost of Goods Sold ( Adjusted )	596,880

6.

Supreme Videos Inc. Income Statement For the year ended December 31
	$	$
Sales		953,000
Cost of Goods Sold		596,880
Gross Profit		356,120
Marketing and Administrative Expenses
Advertising Expense	144,000
Salaries Expense	109,000
Insurance Expense	2,520
Depreciation Expense	24,500
Miscellaneous Expense	10,000
Total Marketing and Administrative Expenses		290,020
Net Operating Income		$ 66,100