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COMPREHENSIVE PROBLEM 2
2 to 3 hours
Strong
Music-Is-Us, Inc.
A mini-practice set illustrating numerous aspects of the accounting cycle for a
merchandising business organized as a corporation. Students are expected to:
2 to 3 hours, Strong
46,975$
16,500
$ 63,475
$ 5,500
a. 25
2,500
Cash 2,525
c. 3,500
3,500
COMPREHENSIVE PROBLEM 2
Balance per bank statement, December 31, 2018
Add: Deposits in transit not recorded by bank
Deduct: Outstanding checks
No. 508
a.
December 31, 2018
MUSIC-IS-US
Bank Reconciliation
the NSF check received from Iggy Bates.
Bank Service Charges
December.
General Journal
Accounts Receivable
To record bank service charges for December and
To record uncollectible accounts expense for
Allowance for Doubtful Accounts
Uncollectible Accounts Expense
f. 600
Prepaid Insurance 600
COMPREHENSIVE PROBLEM 2
December. (Note: One month of the twelve-month
To record insurance policies expired during
General Journal
Insurance Expense
policy had already been accounted for in
November).
Cash $ 42,475
27,500
127,500
8,500$
70,000
4,800
81,000
1,000,000
240,200
8,500
1,603,200
j.
Unrealized holding gain on investments
Unearned customer deposits
Retained earnings
COMPREHENSIVE PROBLEM 2
Adjusted Trial Balance
As of December 31, 2018
Allowance for doubtful accounts
MUSIC-IS-US
Marketable securities
Accounts receivable
Income taxes payable
Capital stock
Sales
Accounts payable
k.
1,603,200$
959,350
240,200$
COMPREHENSIVE PROBLEM 2
MUSIC-IS-US (continued)
MUSIC-IS-US
Statement of Retained Earnings
Retained earnings, January 1, 2018
For the Year Ending December 31, 2018
MUSIC-IS-US
Income Statement
For the Year Ended December 31, 2018
Sales
Cost of goods sold
k. (continued)
42,475$
27,500
444,525$
1,791,000$
70,000$
4,800
1,000,000$
331,025
COMPREHENSIVE PROBLEM 2
Building and fixtures
MUSIC-IS-US
Balance Sheet
As of December 31, 2018
Current assets:
Marketable securities
Cash
Total current assets
Plant and equipment:
Stockholders' Equity
Capital stock
Liabilities
Current liabilities:
Accounts payable
Unearned customer deposits
Total liabilities
Retained earnings (from statement of retained earnings)
l. Step 1:
m. Step 1:
27 days
o.
n.
Compute inventory turnover (cost of goods sold ÷ average merchandise
Compute accounts receivable turnover (sales ÷ average accounts receivable)
From a short-term creditor’s perspective, the company appears relatively solvent. It
collects its accounts receivable in less than 30 days, and its uncollectible accounts
Accounts receivable days (from part l above)
