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. $ 91,200 109,400 Star Videos, Ine. 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 $12,000 51,600 86.600 150,200 10,600 627,000 $ 988,400 $ 234,000 754,400 $ 988,400 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 to cost of goods sold. The following transactions were recorded for the year: a. Film, costumes, and similar raw materials purchased on account, $226,000, b. Film, costumes, and other raw materials issued to production, $232,500 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). c. Utility costs incurred (on account) in the production studio, $84,800. d. Depreciation recorded on the studio, cameras, and other equipment, $83,600. 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 (on account). $145,000 f Calarine and wanne naint in roch se fall

Answer 1

$ 1 Preparation of Transaction analysis, cost of goods manufactured cogs and Income statement Star Videos, Inc. Transaction Analysis For the Year Ended December 31 Accounts Retained Payable Earnings $ 2,34,000 $ 7,54,400 $ 2,26,000 a) b) d a) e) F Accounts Videos in Finished Manufacturing Prepaid Studio & Cash Receivable Raw Materials Process Videos Overhead Insurance Equipment (net) Beginning balance @ 1/1 $ 91,200 $ 1,09,400 $ 12,000 $ 51,600 $ 86,600 $ $ 10,600 $ 6,27,000 Raw material purchases $ 2,26,000 Raw materials used $ -2,32,500 $ 1,97,625 $ 34,875 Utility costs $ 84,800 Depreciation charges $ 62,700 $ -83,600 Advertising Salaries & wages $ -3,00,000 $ 1,00,600 $ 93,000 Prepaid Insurance $ 6,580 $ -9,400 Miscellaneous marketing $ 2,90,000 $ -2,90,000 Transfer completed videos to finished goods $-5,00,000 $ 5,00,000 Sales $ 10,80,000 Transfer finished goods to cost of goods sold $-5,40,450 Cash collections from customers $ 10,30,000 $-10,30,000 Payment to suppliers $ -5,34,000 Overapplied overhead 8,045 Ending balances @12/31 $ 2,87,200 $ 1,59,400 $ 5,500 $ 1,39,825 $ 46,150 $ $ 1,200 $ 5,43,400 $ 84,800 $ -20,900 $ 1,45,000 $ -1,45,000 $ -1,06,400 $ $ 12,750 $ -12,750 9) hi 13 -2,820 Applied overhead k) 1) m) $ 10,80,000 $ -5,40,450 o $ -5,34,000 $ 8,045 $ 1,68,550 $ 10,14,125 $ 11,82,675 $ 11,82,675 Star Videos, Inc. Schedule of Cost of Goods Manufactured For the Year Ended December 31 Beginning raw materials inventory $ $ 12,000 Add: Raw material purchases $ 2,26,000 Raw materials available for use $ 2,38,000 Less: Ending raw materials inventory 5,500 Raw materials used $ 2,32,500 ...ale Less: Indirect materials 34,875 1,97,625 Direct labor $ 1,00,600 Manufacturing overhead $ 2,90,000 Total manufacturing costs $ 5,88,225 Add: Beginning videos in process inventory $ 51,600 Total videos in process inventory Less: Ending videos in process inventory $ 1,39,825 Cost of goods manufactured $ 5,00,000 6,39,825 3 Star Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31 Cost of goods manufactured $ 5,00,000 Add: Beginning finished goods inventory $ 86,600 Cost of goods available for sale $ 5,86,600 Less: Ending finished goods inventory 46,150 Cost of goods sold $ 5,40,450 Less: Overapplied overhead $ 8,045 Adjusted cost of goods sold $ $ 5,32,405 Star Videos, Inc. Income Statement For the Year Ended December 31 Sales revenue $10,80,000 Cost of goods sold $ 5,32,405 Gross profit $ 5,47,595 Operating expenses $ 2,87,870 Net income $ $ 2,59,725 * Kindly Comment down for any clarifications/ queries and please upvote.