Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

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Music-Is-Us, Inc., is a supplier of musical instruments for professional and amateur musicians.he company's accountants make adjusting entries monthly, and they make all closing entries annually.he 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:

Other information pertaining to the company's trial balance is shown below:
1.he most recent bank statement reports a balance of $46,975.ncluded with the bank statement was a $2,500 check from Iggy Smarts, a professional musician, charged back to Music-Is-Us as NSF.he bank's monthly service charge was $25.hree checks written by Music-Is-Us to suppliers of merchandise inventory had not yet cleared the bank for payment as of the statement date.hese checks included: no.08, $5,500; no.11, $7,500; and no.21, $8,000.eposits of $16,500 reached the bank too late for inclusion in the current bank statement.he company prepares a bank reconciliation at the end of each month.
2.usic-Is-Us has a portfolio of marketable securities that originally cost $19,000.s of December 31, the market value of these securities was $27,500.ll short-term investments are classified as "available for sale."
3.uring December, $6,400 of accounts receivable were written off as uncollectible. recent aging of the company's accounts receivable led management to conclude that an allowance for doubtful accounts of $8,500 is needed at December 31, 2015.
4.he company uses a perpetual inventory system. year-end physical count revealed that several guitars reported in the inventory records were missing.he cost of the missing units amounted to $1,350.his amount is not considered significant relative to the total cost of inventory on hand.
5.t December 31, approximately $900 in office supplies remained on hand.
6.he company pays for its insurance policies 12 months in advance.ts most recent payment was made on November 1, 2015.he cost of this policy was slightly higher than the cost of coverage for the previous 12 months.
7.epreciation expense related to the company's building and fixtures is $5,000 for the month ending December 31, 2015.
8.lthough Music-Is-Us carries an extensive inventory, it is not uncommon for experienced musicians to order custom guitars made to their exact specifications.anufacturers do not allow any sales returns of custom-made guitars.he 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, $4,800 of these deposits remained unfilled because the special-order guitars have not been received from the manufacturer.he cost of goods sold and the reduction in inventory associated with all custom orders is recorded when the custom merchandise is delivered to customers.t that time, the adjusting entry requires only a decrease to unearned customer deposits and an increase in sales.
9.ccrued income taxes payable for the entire year ending December 31, 2015, total $81,000.o income tax payments are due until early in 2016.
Instructions
a.repare a bank reconciliation and make the journal entries to update the accounting records of Music-Is-Us as of December 31, 2015.
b.repare the adjusting entry to update the company's marketable securities portfolio to its mark-to-market value.
c.repare the adjusting entry at December 31, 2015, to report the company's accounts receivable at their net realizable value.
d.repare the entry to account for the guitars missing from the company's inventory at the end of the year.
e.repare the adjusting entry to account for the office supplies used during December.
f.repare the adjusting entry to account for the expiration of the company's insurance policies during December.
g.repare the adjusting entry to account for the depreciation of the company's building and fixtures during December.
h.repare the adjusting entry to report the portion of unearned customer deposits that were earned during December.
i.repare the adjusting entry to account for income tax expense that accrued during December.
j.n 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.sing the adjusted trial balance prepared in part j above, prepare an annual income statement, statement of retained earnings, and a balance sheet dated December 31, 2015.
l.sing the financial statements prepared in part k above, determine approximately how many days on average an account receivable remains outstanding before it is collected.ou 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.
m.sing the financial statements prepared in part k, determine approximately how many days on average an item of merchandise remains in stock before it is sold.ou 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.
n.sing the financial statements prepared in part k, determine approximately how many days it takes to convert the company's inventory into cash.n other words, what is the length of the company's operating cycle
o.omment briefly upon the company's financial condition from the perspective of a short-term credito.