Question

Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1, the beginning of its fiscal year, are given below: Supreme Videos, Inc. Balance Sheet January Assets Current assets: Cash Accounts receivable Inventories: Raw materials (film, costumes) Videos in process Finished videos awaiting sale $75,000 114,000 $42,000 20,000 93,000 155,000 Prepaid insurance 11,400 355,400 Total current assets Studio and equipment Less accumulated depreciation 754,000 222,000 532,000 Total assets $887,400 Liabilities and Stockholders' Equity $104,400 Accounts payable Capital stock Retained earnings $501,000 282,000 783,000 Total liabilities and stockholders' equity $887,400 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 is based on a cost formula that estimated $360,000 in manufacturing overhead for an estimated allocation base of 9,000 camera-hours. The following transactions were recorded for the year: a. Film, costumes, and similar raw materials purchased on account, $ 197,000. b. Film, costumes, and other raw materials issued to production, $212,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). c. Utility costs incurred in the production studio, $84,000 for account. d. Depreciation recorded on the studio, cameras, and other equipment, $96,000. 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, $142,000 for account. f. Costs for salaries and wages were incurred as follows: $ 94,000 Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $122,000 $107,000 g. Prepaid insurance expired during the year, $8,200 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $9,800 for account. i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 9,100 camera-hours of activity during the year. . Videos that cost $562,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment. k. Sales for the year totaled $949,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $612,000. I. Collections from customers during the year totaled $862,000. m. Payments to suppliers on account during the year, $512,000; payments to employees for salaries and wages, $303,000. Prepare a T-account for each account on the company’s balance sheet, and enter the beginning balances. Make an entry directly into the T-accounts for transactions (a) through (m).

Answer 1

Answer with working is given below

T-Accounts Cash Accounts Receivable $75,000 $862,000 $114,000 $949,000 $201,000 Beg Bal Beg Bal $512,000 m $862,000 I k $303,000 m End Bal $122,000 End Bal Raw material Prepaid Insurance $11,400 $42,000 $212,000 b Beg Bal Beg Bal $8,200 g $197,000 а $27,000 $3,200 End Bal End Bal Videos in Process $20,000 $180,200 $94,000 $364,000 $562,000 j Finished Goods Beg Bal $93,000 b Beg Bal $562,000 $612,000 k f $43,000 End Bal $96,200 End Bal Accumulated Depreciation $222,000 Studios and Equipment Beg Bal $754,000 $96,000 d Beg Bal End Bal $318,000 $754,000 End Bal Depreciation $0 Studio Overhead Beg Bal $0 $31,800 $84,000 9100 hours X $40/hr $24,000 $24,000 d Beg Bal $364,000 i End Bal с $72,000 d Insurance $122,000 f Beg Bal $6,560 $1,640 g g $47,640 $1,640 End Bal Advertising Expense $0 $142,000 Miscellaneous Expense Beg Bal Beg Bal $9,800 h. $142,000 $9,800 End Bal End Bal Administrative salaries expense Sales Account $0 $107,000 $107,000 $0 Beg Bal Beg Bal $949,000 k f End Bal $949,000 End Bal Accounts Payable Cost of Goods Sold $47,640 o $104,400 Beg Bal Beg Bal $612,000 $197,000 a k $564,360 $84,000 c $142,000 e End Bal $512,000 $9,800 h $25,200 Salaries and Wages payable $0 Beg Bal $303,000 $323,000 f Capital Stock $20,000 $501,000 End Bal Beg Bal End bal Retained Earnings $501,000 $282,000 Beg Bal End Bal $282,000 Predetermined Overhead rate $360,000 $40 per Camera hour 9000 3. Is Studio( manufacturing )Overhead amount under applied or over applied for the year? Over-applied by $47,640 for the year Applied Overhead 4. SUPREME VIDOS INC. Income Statement $949,000 $564,360 $384,640 Sales Less: Cost of goods sold Gross Profit Less: Selling and administration expenses Depreciation expense $24,000 $142,000 Advertising expense Administrative salaries Insurance expense $107,000 $1,640 Miscellaneous expense $9,800 $284,440 $100,200 Net Operating Income