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. $ 64,000 103,000 Supreme Videos, Inc. Balance Sheet January 1 Assets Current assets: Cash Accounts receivable Inventories: Raw materials (film, costumes) Videos in process Finished videos awaiting sale Prepaid insurance Total current assets Studio and equipment Less accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Capital stock Retained earnings Total liabilities and stockholders' equity $ 31,000 46,000 82,000 159,000 9,200 335,200 732,000 211,000 521,000 $856,200 $421,000 271,000 $164,200 692,00€ $856,200 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 $270,000 in manufacturing overhead for an estimated allocation base of 6,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $186,000

Answer 1

(m) (1) Cash Bal. 64000 787000 (1) 851000 End Bal. 128000 Accounts Receivable Bal. 103000 851000 927000 End Bal. 179000 (b) Raw Materials Bal. 31000 201000 (a) 186000 End Bal. 16000 (8) Prepaid Insurance 9200 7100 2100 Bal. End Bal. 6) (k) Bal. (b) (f) (i) End Bal. Videos in Process 46000 551000 160800 83000 306000 44800 Bal. 6) End Bal. Finished Goods 82000 601000 551000 32000 Accumulated Depreciation 211000 Bal. 85000 (d) 296000 End Bal. Studio and Equipment Bal. 732000 End Bal. 732000 Depreciation Expense (d) 21250 End Bal. 21250 (b) (C) (d) (f) Studio Overhead 40200 306000 (i) 73000 ((270000/6000)*6 63750 800) 111000 5325 12725 (g) End Bal. Insurance Expense 1775 1775 (n)

Miscellaneous Expense (h) 8700 End Bal. 8700 Advertising Expense (e) 131000 End Bal. | 131000 (m) Administrative Salary Expense (f) 96000 End Bal. 96000 Accounts Payable 501000 164200 186000 73000 131000 8700 61900 Bal. (a) (c) (e) (h) End Bal. Sales 927000 927000 End Bal. Salaries and Wages Payable (m) 286000 290000 (f) 4000 End Bal. Cost of Goods Sold 601000 12725 588275 (k) Bal. (n) Retained Earnings 271000 Bal. 271000 End Bal. Capital Stock 421000 Bal. 421000 End Bal.

3 Manufacturing Overhead was Overapplied by $12,275 for the Year. 4 Supreme Videos, Inc. Schedule of Cost of Goods Manufactured For the Year Ended December 31 Particulars Amount ($) Amount ($) Beginning video in process inventory 46000 Direct Matrial : Beginning inventory of raw material 31,000 Add": Purchases of raw material 1,86,000 Total raw material available 2,17,000 Less: Ending raw material inventory - 16,000 Raw material used in production 2,01,000 Less: Indirect material consumed -40,200 Direct material used in production 1,60,800 Manufacturing Overhead applied (6800@ 45) 3,06,000 Direct wages incurred 83,000 Total Manufacturing Cost added to production 5,49,800 Total manufacturing Cost to account for 5,95,800 Less: Ending balance of work in process -44,800 Cost of Goods Manufactured 5,51,000

5 Supreme Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31 Particulars Amount ($) Beginning inventory balance of Finished Goods Add: Cost of goods manufactured (as computed above) Cost of Goods available for sale Less: Ending inventory of Finished Goods Cost of goods to be sold Less: Over-applied Overhead Adjusted Cost of Goods Sold 82,000 5,51,000 6,33,000 32000 6,01,000 12725 5,88,275 6 Supreme Videos, Inc. Income Statement For the Year Ended December 31 Particulars Amount ($) Amount (S) Sales Revenue 927000 Less: Cost of goods sold (as computed above) 5,88,275 Gross Margin 3,38,725 Less: Selling and administation expense Depreciation Expense 21,250 Advertisement 1,31,000 Administrative Salaries 96,000 Insurance Expenses 1,775 Miscellaneous Expense 8,700 2,58,725 Net Income earned during the period 80,000

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