Question

Star Videos, Inc. Balance Sheet January 1 Assets $ 76,200 104,200 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 $35,600 49,000 82,600 167,200 8,500 595,000 $ 951,100 $ 238,000 713,100 $ 951,100 Total liabilities and stockholders' equity 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, $204,500. b. Film, costumes, and other raw materials issued to production, $232,000 (85% of this material wass considered direct to the videos in production, and the other 15% was considered indirect) c. Utility costs incurred (on account) in the production studio, $93,200. d. Depreciation recorded on the studio, cameras, and other equipment, $107,600. 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), $134,000. . Salaries and wages paid in cash as follows: Direct labor (actors and directors) In desi Administrative salaries 92,800 ect labor (carpenters to build sets, costume $71,000 rth) $95,400 g. Prepaid insurance expired during the year, $7,600 (70% related to production of videos, and 30% related to marketing and administrative activities) h. Miscellaneous marketing and administrative expenses incurred (on account), $11,550. i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year j. Videos that cost $546,000 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 $954,000 and were all on account. . The total cost to produce the videos that were sold according to their job cost sheets was $589,670. m. Collections from customers during the year totaled $904,000. n. Payments to suppliers on account during the year, $558,000. o. Underapplied or overapplied overhead $_?__ Required: 1. Prepare a transaction analysis that records all of the above transactions. 2. Prepare a schedule of cost of goods manufactured for the year. 3. Prepare a schedule of cost of goods sold for the year 4. Prepare an income statement for the year. Complete this question by entering your answers in the tabs below. Star Videos, Inc. Schedule of Cost of Goods Manufactured For the Year Ended December 31 Beginning raw materials inventory $ 197,200 197,200 197,200 197,200 197,200 Total manufacturing costs 197,200 $ 197,200 Cost of goods manufactured Required 1 Required 2 Required 3 Required 4 Prepare a schedule of cost of goods sold for the year. Star Videos, Inc. Schedule of Cost of Goods Sold For the Year Ended December 31 0 $ 0 Prepare an income statement for the year. Star Videos, Inc. Income Statement For the Year Ended December 31 0 0

Answer 1

2.

Star Videos, Inc.
Schedule of Cost of Goods Manufactured
For the Year Ended December 31
Beginning raw materials inventory $	35600
Add: Raw material purchases	204500
Raw materials available for use	240100
Less: Ending raw materials inventory	8100
Raw materials used	232000
Less: Indirect materials	34800	197200
Direct labor		92800
Manufacturing overhead (7250 x $40)		290000
Total manufacturing costs		580000
Add: Beginning videos in process inventory		49000
Total videos in process inventory		629000
Less: Ending videos in process inventory		83000
Cost of goods manufactured		546000

3.

Star Videos, Inc.
Schedule of Cost of Goods Sold
For the Year Ended December 31
Cost of goods manufactured	546000
Add: Beginning finished goods inventory	82600
Cost of goods available for sale	628600
Less: Ending finished goods inventory	38930
Cost of goods sold	589670
Less: Overapplied overhead	4980
Adjusted cost of goods sold $	584690

4.

Star Videos, Inc.
Income Statement
For the Year Ended December 31
Sales revenue	954000
Cost of goods sold	584690
Gross profit	369310
Operating expenses	270130
Net income $	99180

Working:

		Manufacturing Overhead	Retained Earnings
	Beginning balance @ 1/1	0	713100
b)	Raw materials used (15% x $232000)	34800
c)	Utility costs	93200
d)	Depreciation charges ($107600 x 3/4); ($107600 x 1/4)	80700	-26900
e)	Advertising		-134000
f)	Salaries & wages	71000	-95400
g)	Prepaid insurance ($7600 x 60%); ($7600 x 30%)	5320	-2280
h)	Miscellaneous marketing		-11550
i)	Applied overhead	-290000
k)	Sales		954000
l)	Transfer finished goods to cost of goods sold		-589670
o)	Overapplied overhead	4980	4980
	Ending balances @12/31	0	812280