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    Accounting 101 Comprehensive Problem 2

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    Jay Ng
    This document provides accounting information for Guitar Universe, Inc. as of December 31, 2011 including: 1) A bank reconciliation and journal entries to update the accounting records including outstanding checks, bank charges, and an NSF check. 2) Journal entries to record marketable securities valuation, bad debt expense, cost of goods sold, supplies expense, insurance expense, depreciation expense, unearned revenue, and income tax expense. 3) Guitar Universe's adjusted trial balance, income statement, statement of retained earnings, balance sheet, and calculations of account receivable and inventory turnover.

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    © All Rights Reserved
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    Accounting 101 Comprehensive Problem 2

    Uploaded by

    Jay Ng
    370 views5 pages
    This document provides accounting information for Guitar Universe, Inc. as of December 31, 2011 including: 1) A bank reconciliation and journal entries to update the accounting records including outstanding checks, bank charges, and an NSF check. 2) Journal entries to record marketable securities valuation, bad debt expense, cost of goods sold, supplies expense, insurance expense, depreciation expense, unearned revenue, and income tax expense. 3) Guitar Universe's adjusted trial balance, income statement, statement of retained earnings, balance sheet, and calculations of account receivable and inventory turnover.

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    COMPREHENSIVE PROBLEM #2 GUITAR UNIVERSE, INC.

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    This document provides accounting information for Guitar Universe, Inc. as of December 31, 2011 including: 1) A bank reconciliation and journal entries to update the accounting records including outstanding checks, bank charges, and an NSF check. 2) Journal entries to record marketable securities valuation, bad debt expense, cost of goods sold, supplies expense, insurance expense, depreciation expense, unearned revenue, and income tax expense. 3) Guitar Universe's adjusted trial balance, income statement, statement of retained earnings, balance sheet, and calculations of account receivable and inventory turnover.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    370 views5 pages

    Accounting 101 Comprehensive Problem 2

    Uploaded by

    Jay Ng
    This document provides accounting information for Guitar Universe, Inc. as of December 31, 2011 including: 1) A bank reconciliation and journal entries to update the accounting records including outstanding checks, bank charges, and an NSF check. 2) Journal entries to record marketable securities valuation, bad debt expense, cost of goods sold, supplies expense, insurance expense, depreciation expense, unearned revenue, and income tax expense. 3) Guitar Universe's adjusted trial balance, income statement, statement of retained earnings, balance sheet, and calculations of account receivable and inventory turnover.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    COMPREHENSIVE PROBLEM #2

    GUITAR UNIVERSE, INC.

    a. Prepare a bank reconciliation and make the necessary journal entries to update the
    accounting records of Guitar Universe as of December 31, 2011.

    Bank statement balance as of Dec 31, 2011


    Add: Deposits not recorded by bank
    Total
    Less: Outstanding checks
    Check No. 507
    Check No. 511
    Check No. 521
    Adjusted cash balance
    Depositors record balance as of Dec 31, 2011
    Less: Bank service charge
    NSF check from Iggy Bates
    Adjusted cash balance

    $46,975
    $16,500
    $63,475
    $4000
    $9000
    $8000

    $45000
    $25
    $2500

    Bank service charges


    Account Receivable (NSF check from Iggy
    Bates)
    Cash

    25
    2500

    b. Marketable Securities
    Unrealized holding gain on investment
    To increase reported value of marketable
    securities to $27,500 from $25000

    2500

    c. Uncollectible accounts expense (for


    December)
    Allowance for doubtful accounts

    $21000
    $42,475

    $2525
    $42,475

    2525
    2500

    3500
    3500

    d. Cost of goods sold


    Inventory

    1350

    e. Office supplies expense


    Office supplies

    300

    f. Insurance expense
    Prepaid insurance

    600

    g. Depreciation expense
    Accumulated depreciation

    5000

    h. Unearned customer deposits


    Sales
    i. Income Tax Expense accrued during
    December

    3200

    1350
    300
    600
    5000
    3200
    6000

    Income tax payable

    6000

    j. Guitar Universe, Incs Adjusted Trial Balance at Dec 31, 2011


    Cash
    Marketable Securities
    Account Receivable
    Allowance for doubtful accounts
    Merchandise inventory
    Office supplies
    Prepaid insurance
    Building and fixtures
    Accumulated depreciation
    Land
    Account payable
    Unearned customer deposits
    Income taxes payable
    Capital stock
    Retained earnings
    Unrealized holding gain on investments
    Sales
    Cost of goods sold
    Bank service charges
    Uncollectible account expense
    Salary and wages expense
    Office supplies expense
    Insurance expense
    Utilities expense
    Depreciation expense
    Income tax expense

    42,475
    27,500
    127,500
    8500
    248,650
    900
    6000
    1,791,000
    805,000
    64,800
    70,000
    4800
    81,000
    1,000,000
    240,200
    8500
    1,603,200
    959,350
    225
    12,500
    395,000
    700
    7000
    3600
    53,000
    81,000
    $3,821,200

    $3,821,200

    k. Guitar Universes year end income


    statement
    Sales
    Cost of goods sold
    Gross profit
    Bank service charges
    Uncollectible accounts expense
    Salary and wages expense
    Office supplies expense
    Insurance expense
    Utilities expense
    Depreciation expense

    1,603,200
    959,350
    643,850
    225
    12500
    395000
    700
    7000
    3600
    53000

    472,025

    Income before tax


    Income taxes expense
    Net income

    $171825
    81000
    $90,825

    Statement of Retained Earnings Dec 31, 2011


    Retained earnings Jan 1, 2011
    Add: Net income
    Ending retained earnings Dec, 2011

    240,200
    90,825
    $331,025

    Current assets as of Dec 31, 2011


    Cash
    Marketable securities
    Account receivable
    Less: Allowance for doubtful accounts

    42475
    27500
    127,500
    8500

    Marchandise inventory
    Office supplies
    Prepaid insurance
    Total current assets
    Plant and equipment
    Building and fixtures
    Less: accumulated depreciation
    Land
    Total plant and equipment
    Total assets

    119000
    248650
    900
    6000
    $444,525

    1,791,000
    (805,000)

    986,000
    64800
    $1,050,800
    $1,495,325

    Liabilities
    Current liabilities:
    Acct Payable
    Unearned customer deposits
    Income tax payable
    Total current liabilities
    Long term liabilities
    Total liabilities

    70000
    4800
    81000
    $155,800
    0
    $155,800

    Stockholders Equity
    Capital stock
    Retained earnings
    Unrealized holding gain on investments

    1,000,000
    331,025
    8500

    Total stockholders equity


    Total liabilities and stockholders equity

    $1,339,525
    $1,495,325

    l. Account receivable turnover:


    $1,603,200 / $119,000 = 13.5 times
    Account receivable days:
    365 days / 13.5 = 27 days
    m. Inventory turnover:
    $959,350 / $248,650 = 3.9 times
    Inventory days:
    365 days / 3.9 = 94 days
    n. Operating cycle: 27 days + 94 days = 121 days
    o. From a short term creditors perspective, the company appears to be
    solvent. The company collects its account receivable in less than 30
    days. The company seems to stock too much inventory because its
    inventory days are 94 day.

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