Question

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. $ 89,000 104,400 ok Star Videos, Inc. Balance Sheet January 1 Assets Cash Accounts receivable Inventories: Raw materials (film, costumes) videos in process Finished videos awaiting sale Prepaid insurance Studio and equipment (net) Total assets Liabilities and Stockholders' Equity Accounts payable Retained earnings Total liabilities and stockholders' equity $ 20,200 59,000 82,400 ht ences 161,600 12,350 618,000 $985, 350 $ 180,000 805,350 $985,350 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

Answer 1

1 No. a. b. c. d. e. f. 8. h. i. j. k. 1. Particulars Beginning Balance Raw material purchased Raw material consumed Utility cost incurred Depreciation on equipment Advertisement incurred Salaries and wages paid Prepaid insurance expired Misc. marketing and administrative expense Manufacturing overhead applied Cost of goods manufactured Sales on account Cost of goods sold Cash collections Payment to suppliers Over-applied overhead Ending Balance 12/31 Accounts Raw Videos in Finished Manufacturi Prepaid Studio & Accounts Retained Cash Receivable Materials Process Goods ng Overhead Insurance Equipment (net) = Payable Earnings 89000 104400 20200 59000 82400 12350 618000 180000 805350 1,94,500 1,94,500 -2,10,000 1,78,500 31,500 95,400 95,400 66,300 -88,400 -22,100 1,39,500 -1,39,500 -2,74,800 95,400 82,000 -97,400 7,665 -10,950 -3,285 13,650 - 13,650 2,90,000 -2,90,000 -5,04,000 5,04,000 9,88,000 9,88,000 -5,44,730 -5,44,730 9,38,000 -9,38,000 -5,28,000 -5,28,000 7,135 7,135 224200 154400 4700 118900 41670 0 1400 5296000 95050 979820 n. 0.

2 Star Videos, Inc. Schedule of Cost of Goods Manufactured For the Year Ended December 31 Particulars Amount ($) Amount ($) Beginning inventory of raw material 20,200 Add": Purchases 1,94,500 Less: Ending inventory -4,700 Raw material consumed 2,10,000 Less: Indirect material consumed -31,500 Direct material consumed 1,78,500 Direct wages incurred 95,400 Manufacturing Overhead applied (7,250@ 40) 2,90,000 Total Manufacturing Cost 5,63,900 Add: Beginning balance of work in process 59,000 Less: Ending balance of work in process -1,18,900 Cost of Goods Manufactured 5,04,000 3 Star Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31 Particulars Cost of goods manufactured (as computed above) Add: Beginning inventory balance of Finished Goods 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 Amount ($) 5,04,000 82,400 5,86,400 41670 5,44,730 7135 5,37,595

4 Star Videos, Inc. Income Statement For the Year Ended December 31 Particulars Amount ($) Amount ($) Sales Revenue 988000 Less: Cost of goods sold (as computed above) 5,37,595 Gross Margin 4,50,405 Less: Expenses Depreciation on Equipment 22,100 Advertisement 1,39,500 Administrative Salaries 97,400 Insurance Expenses 3,285 Misc. Marketing and administrative expenses 13,650 2,75,935 Net Income earned during the period 1,74,470

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