Music-Is-Us, Inc., is a supplier of musical instruments for professional and ama
ID: 2451587 • Letter: M
Question
Music-Is-Us, Inc., is a supplier of musical instruments for professional and amateur musicians. The company’s accountants make adjusting entries monthly, and they make all closing entries annually. The company is growing rapidly and prides itself on having no long-term liabilities. The company has provided the following trial balance dated December 31, 2015: MUSIC-IS-US, INC. TRIAL BALANCE DECEMBER 31, 2015 Cash $ 45,000 Marketable securities 29,000 Accounts receivable 126,000 Allowance for doubtful accounts $ 5,900 Merchandise inventory 254,000 Office supplies 1,600 Prepaid insurance 7,150 Building and fixtures 1,798,000 Accumulated depreciation 791,000 Land 64,800 Accounts payable 66,000 Unearned customer deposits 8,000 Income taxes payable 73,000 Capital stock 920,000 Retained earnings 233,200 Unrealized holding gain on investments 6,000 Sales 1,698,290 Cost of goods sold 949,000 Bank service charges 240 Uncollectible accounts expense 8,200 Salary and wages expense 392,000 Office supplies expense 500 Insurance expense 6,100 Utilities expense 2,800 Depreciation expense 44,000 Income tax expense 73,000 $ 3,801,390 $ 3,801,390 Other information pertaining to Guitar Universe’s trial balance is shown below: 1. The most recent bank statement reports a balance of $46,670. Included with the bank statement was a $2,200 check from Iggy Smarts, a professional musician, charged back to Music-Is-Us as NSF. The bank’s monthly service charge was $30. Three checks written by Music-Is-Us to suppliers of merchandise inventory had not yet cleared the bank for payment as of the statement date. These checks included: no. 508, $4,200; no. 511, $8,700; and no. 521, $8,000. Deposits of $17,000 reached the bank too late for inclusion in the current bank statement. The company prepares a bank reconciliation at the end of each month. 2. Music-Is-Us has a portfolio of marketable securities that originally cost $23,000. As of December 31, the market value of these securities was $31,700. All short-term investments are classified as "available for sale." 3. During December, $6,200 of accounts receivable were written off as uncollectible. A recent aging of the company's accounts receivable helped management to conclude that an allowance for doubtful accounts of $7,800 was needed at December 31, 2015. 4. The company uses a perpetual inventory system. A year-end physical count revealed that several guitars reported in the inventory records were missing. The cost of the missing units amounted to $1,500. This amount is not considered significant relative to the total cost of inventory on hand. 5. At December 31, approximately $870 in office supplies remained on hand. 6. The company pays for its insurance policies 12 months in advance. Its most recent payment was made on November 1, 2015. The cost of this policy was slightly higher than the cost of coverage for the previous 12 months. 7. Depreciation expense related to the company's building and fixtures is $7,000 for the month ending December 31, 2015. 8. Although Music-Is-Us carries an extensive inventory, it is not uncommon for experienced musicians to order custom guitars made to their exact specifications. Manufacturers do not allow any sales returns of custom-made guitars. The entire sales amount is collected at the time a custom order is placed, and is credited to an account entitled “Unearned Customer Deposits.” As of December 31, $3,900 of these deposits remained unfilled because the special-order guitars have not been received from the manufacturer. The cost of goods sold and the reduction in inventory associated with all custom orders is recorded when the custom merchandise is delivered to customers. At that time, the adjusting entry requires only a decrease to unearned customer deposits and an increase in sales. 9. Accrued income taxes payable for the entire year ending December 31, 2015, total $83,000. No income tax payments are due until early in 2016.
a. Prepare a bank reconciliation and make the journal entries to update the accounting records of Music-Is-Us as of December 31, 2015.
b.Prepare the necessary adjusting entries at December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
j.On the basis of the adjustments made to the accounting records in parts a through i above, prepare the company's adjusted trial balance at December 31, 2015.
k Using the adjusted trial balance prepared in part j above, prepare an annual income statementdated December 31, 2015.
L Using the adjusted trial balance prepared in part j above, prepare statement of retained earnings dated December 31, 2015. k-3. Using the adjusted trial balance prepared in part j above, prepare a balance sheet dated December 31, 2015. (Amounts to be deducted should be indicated with minus sign.)
Using the financial statements prepared in part k above, determine approximately how many days an account receivable remains outstanding before it is collected. You may assume that the company's ending accounts receivable balance on December 31 is a close approximation of its average accounts receivable balance throughout the year. (Use 365 days a year. Round intermediate calculations to 1 decimal place and your final answer to the nearest whole number. ) .
Using the financial statements prepared in part k, determine approximately how many days an item of merchandise remains in stock before it is sold. You may assume that the company's ending merchandise inventory balance on December 31 is a close approximation of its average merchandise inventory balance throughout the year. (Use 365 days a year. Round intermediate calculations to 1 decimal place and your final answer to the nearest whole number. )
Using the financial statements prepared in part k, determine approximately how many days it takes to convert the company's inventory into cash. (Use 365 days a year. Round intermediate calculations to 1 decimal place and your final answer to the nearest whole number. )
Explanation / Answer
Answer:a
Answer:b
General Journal
Accounts Receivable2200
To cash 2230
To unrealized holding gain on investment 2700
To Allowance for doubtful accounts $1900
To inventory A/C $1500
To office supplies A/C730
To prepaid insurance A/C$3150
To Accumulated dep A/C 7000
To sales A/C4100
To income tax payable A/C 10000
Answer:j
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