Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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. 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 Supreme Videos, Inc. Balance Sheet January 1 $63,000 102,000 $30,000 45,000 81,000 156,000 9,000 330,000 730,000 210,000 520,000 $850,000 $160,000 $420,000 270,000 690,000 $850,000 Because the videos differ in length and 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 based on camera-hours of activity. The company's predetermined overhead rate for the year is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials used in production, $200,000 (85% of this material was direct to the videos in production, and the other 15% was indirect). c. Utility costs incurred in the production studio, $72,000. d. Depreciation on the studio, cameras, and other equipment, $84,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred, $130,000. f. Costs for salaries and wages were incurred as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $82,000 $110,000 $95,000 g. Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,600. i. Studio (manufacturing) overhead was applied to videos in production. The company used 7.250 camera-hours during the year. j. Videos costing $550,000 to produce were transferred to the finished videos warehouse. k. Sales for the year totaled $925,000 and were all on account. The total cost to produce these videos was $600,000. 1. Collections from customers during the year, $850,000. m. Payments to suppliers on account during the year, $500,000; payments to employees for salaries and wages, $285,000. Required: 1. Prepare a T-account for each account on the company's balance sheet and enter the beginning balances. Page 140 2. Record the transactions in the T-accounts. Prepare new T-accounts as needed. Key your entries to the letters (a) through (m) above. Compute the ending balance in each account. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied? Make an entry in the T-accounts to close the Studio Overhead account to Cost of Goods Sold. 4. Prepare a schedule of cost of goods manufactured. If done correctly, the cost of goods manufactured should agree with which of the above transactions? 5. Prepare a schedule of cost of goods sold. If done correctly, the unadjusted cost of goods sold should agree with which of the above transactions? 6. Prepare an income statement. 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. 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 Supreme Videos, Inc. Balance Sheet January 1 $63,000 102,000 $30,000 45,000 81,000 156,000 9,000 330,000 730,000 210,000 520,000 $850,000 $160,000 $420,000 270,000 690,000 $850,000 Because the videos differ in length and 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 based on camera-hours of activity. The company's predetermined overhead rate for the year is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials used in production, $200,000 (85% of this material was direct to the videos in production, and the other 15% was indirect). c. Utility costs incurred in the production studio, $72,000. d. Depreciation on the studio, cameras, and other equipment, $84,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred, $130,000. f. Costs for salaries and wages were incurred as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $82,000 $110,000 $95,000 g. Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,600. i. Studio (manufacturing) overhead was applied to videos in production. The company used 7.250 camera-hours during the year. j. Videos costing $550,000 to produce were transferred to the finished videos warehouse. k. Sales for the year totaled $925,000 and were all on account. The total cost to produce these videos was $600,000. 1. Collections from customers during the year, $850,000. m. Payments to suppliers on account during the year, $500,000; payments to employees for salaries and wages, $285,000. Required: 1. Prepare a T-account for each account on the company's balance sheet and enter the beginning balances. Page 140 2. Record the transactions in the T-accounts. Prepare new T-accounts as needed. Key your entries to the letters (a) through (m) above. Compute the ending balance in each account. 3. Is the Studio (manufacturing) Overhead account underapplied or overapplied? Make an entry in the T-accounts to close the Studio Overhead account to Cost of Goods Sold. 4. Prepare a schedule of cost of goods manufactured. If done correctly, the cost of goods manufactured should agree with which of the above transactions? 5. Prepare a schedule of cost of goods sold. If done correctly, the unadjusted cost of goods sold should agree with which of the above transactions? 6. Prepare an income statement.
Expert Answer:
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
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. Because the videos differ in length and in...
-
The word culture is used in many ways, such as when people talk about national culture, organisational culture, political culture or youth culture. In which ways do the meanings of culture differ?
-
Use the Numerov method to calculate the lowest four l = 0 energy eigenvalues and the lowest four l = 1 eigenvalues of the three-dimensional isotropic harmonic oscillator, which has V = 1/2 kr2....
-
The proportion P of susceptible people who are infected t weeks after the outbreak of an epidemic is given by the integral where a and b are parameters that depend on the disease and C is a constant....
-
In 2015, the city of San Francisco enacted an ordinance that required health warnings on advertisements for certain sugar-sweetened beverages (SSBs) that read: WARNING: Drinking beverages with added...
-
Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2011, which requires 6 annual payments of $40,000 each, beginning January 1, 2011. In addition, Indiana Jones...
-
Wood Jojo is a carpenter and now he needs X metres of wood. He is now in a forest with N trees with integer height in metres, A 1 , A 2 , . . . , A N . He has a special cutting device. The device can...
-
What mass of this pollutant with each beadth fou inhaling inhaRe are 2 Assume that SOoml o air with each Greath you ! Express Your anstoer inorams witbs an appropria x mulhelee(or evasne io fix...
-
An IRS auditor construes your client's ownership of an exchange property of less than a year to be the actions of a real estate dealer. What would most likely happen in this instance?
-
A stream of air at 100 kPa pressure and 300 K is flowing on the top surface of a thin flat sheet of solid naphthalene of length 0.2 m with a velocity of 20 m/sec. The other data are: Mass diffusivity...
-
1. Explain why amounts related to each of the following items is shown as either a positive or negative item in the operating section of the Statement of Cash Flows. (6 points) a. Intangible asset...
-
Lets discuss the legal standpoint, that negligence is defined. write discussion thread on this topic with your professional critique of facts versus the law language on reasonable man would do or...
-
The maximum force a grocery sack can with- stand and not rip is 250 N. If 20.0 kg of gro- ceries are lifted from the floor to the table with an acceleration of 5.0 m/s, will the sack hold?
-
Identify and briefly discuss three differences between strategy formulation and strategy implementation?
-
Explain the differences and similarities between fringe benefits and salary as forms of compensation.
-
Study the density matrix and the partition function of a system of free particles, using the unsymmetrized wavefunction (5.4.3) instead of the symmetrized wavefunction (5.5.7). Show that, following...
-
Show that in the first approximation the partition function of a system of \(N\) noninteracting, indistinguishable particles is given by \[ Q_{N}(V, T)=\frac{1}{N ! \lambda^{3 N}} Z_{N}(V, T), \]...
-
Show that, for any law of distribution of molecular speeds, \[ \left\{\langle uangle\left\langle\frac{1}{u}ightangleight\} \geq 1 \] Check that the value of this quantity for the Maxwellian...
Study smarter with the SolutionInn App