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 Star Videos, Inc. Balance Sheet January1 AssetsS Cash Accounts receivable Inventories: $ 82,600 104,400 Raw materials (film, costumes) $47,600 49,600 96,200 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 193,400 10,900 534,000 $925,300 162,000 763,300 $925,300 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:
