1. MZM Studios is an independent movie production firm. During 2022 the firm cre

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1. MZM Studios is an independent movie production firm. During 2022 the firm created the movie titled “The Good Girls.” During production the firm used cash to pay the movie’s star actors a total of $1,219,518 and the movie producers and writing team a total of $2,389,750. The firm also incurred $881,870 of production-related movie set costs; the firm received an invoice for these costs in December 2022 and expects to pay the invoice in January 2023. The firm also used $294,481 of cash to pay a marketing firm to run digital ads related to the new movie in December 2022. All filming and production activities ended in mid-December 2022 and this movie is scheduled to be released in February 2023. Using only the information provided in this question, what is your best estimate of the dollar amount of “Movie Content Assets” that appears on the firm’s Balance Sheet as of December 31, 2022? Would you expense or capitalize the marketing costs since it is not directly related to the movie production? 2. The following describes operating activities at Tara’s Tables over a three-month period:
Month 1: Tara’s Tables begins manufacturing tables by purchasing $30,000 of wood and a $10,000 manufacturing machine. Production is expected to last two months and the machine has no resale value. The firm also rents a small space in a manufacturing facility for $3,000 a month. The firm hires one employee whose only job is to use the machine and turn the wood into tables in the manufacturing facility. This employee receives a monthly wage of $5,000. The company also hires a marketing expert to begin gauging customer interest in the tables. The marketing expert is paid $6,000 for services rendered.
Month 2: On the first day of the month, the firm enters into a rental agreement for a small retail storefront on 14th Street NW for a cost of $4,000 per month. The finished goods tables are moved into the store, but no one buys any tables. The employee continues to make tables at the manufacturing facility, so the manufacturing facilities rent of $3,000 and the employee wages of $5,000 are paid. At the end of the month, table production ends as expected. The employee is let go and the firm does not renew its manufacturing facilities rental agreement.
Month 3: The remaining tables are moved into the storefront, and during the month all tables are sold for an aggregate sales price of $90,000. The firm pays its $4,000 monthly storefront rental agreement, and a commission to its sales representative (10% of gross revenues).
The firm prepares monthly financial statements. What is operating income (loss) during month 2?
Would the storefront rent be expensed or capitalized since it is not directly related to manufacturing?

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