CP2 Descriptive Problem 2 Music Is USA Mini Practice

CP2 Desccomprehensive Problem 2music Is Usa Mini Practice Set Illustr

CP2-Desccomprehensive Problem 2music Is Usa Mini Practice Set Illustr

CP2-Desccomprehensive Problem 2 music Is Usa Mini Practice Set Illustr

Paper For Above instruction

This comprehensive accounting problem set involves multiple aspects of the accounting cycle for a merchandising business organized as a corporation, specifically focusing on Music-Has-Us. The task encompasses preparing a bank reconciliation, making various adjusting journal entries, preparing financial statements, and analyzing the company's financial condition from a short-term creditor's perspective. The problem provides detailed data and transactions relevant to December 31, 2015, including bank statement information, journal entries for adjustments such as marketable securities, uncollectible accounts, inventory shrinkage, depreciation, and other expenses. It also includes preparing an adjusted trial balance, income statement, statement of retained earnings, and balance sheet, followed by calculating financial ratios like accounts receivable turnover, inventory turnover, and operating cycle days.

Paper For Above instruction

The task requires constructing a complete set of financial statements and analyses based on given data for Music-Has-Us as of December 31, 2015. Initially, a bank reconciliation must be prepared to adjust the company's records with the bank statement, accounting for deposits in transit, outstanding checks, bank service charges, and NSF checks. The accuracy of the company's cash account depends crucially on this reconciliation, which highlights discrepancies that need recording or correction in the company's books.

Subsequently, the assignment involves recording a series of journal entries to reflect various adjustments. These include recognizing bank service charges and NSF checks, adjusting the marketable securities' value for unrealized gains, recording uncollectible accounts expense, inventory shrinkage, and office supplies used. Moreover, adjustments such as recording expired insurance policies, depreciation, revenue from customer deposits, and accrued income taxes must be made. Each of these entries ensures that the financial data accurately reflect the company's financial position and performance for the period.

Following the journal entries, the task requires preparing an adjusted trial balance. This step consolidates all account balances after adjustments, serving as the foundation for financial statement preparation. The income statement summarizes revenue, expenses, and net income, highlighting the company's profitability for 2015. The statement of retained earnings then shows changes in retained earnings over the period, incorporating net income and dividends or other reductions.

The balance sheet provides a snapshot of the company's financial position at year-end, listing current assets, long-term assets, current liabilities, long-term liabilities, and stockholders' equity. It reflects the impact of all previous adjustments and transactions, illustrating the company's liquidity, leverage, and ownership structure.

Finally, the analytical component involves calculating important financial ratios—such as accounts receivable turnover, days’ sales in receivables, inventory turnover, and days inventory outstanding—which are critical for assessing the company's liquidity, operational efficiency, and overall financial health from a creditor’s perspective. These ratios help in understanding how effectively the company manages receivables and inventory, contributing to an overall assessment of its short-term financial stability.

Through this comprehensive set of tasks, students demonstrate their understanding of core accounting processes, including bank reconciliations, journal entries, financial statement preparation, and financial analysis—all essential skills for accurate financial reporting and decision-making in a merchandising business.

References

  • Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2019). Financial Accounting. Wiley.
  • Horngren, C. T., Sundem, G. L., Elliott, J. A., & Philbrick, D. (2018). Introduction to Financial Accounting. Pearson.
  • Gibson, C. H. (2020). Financial Reporting & Analysis. Cengage Learning.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2021). Financial Accounting Theory. Wiley.
  • Stice, E., Stice, J., & Skousen, C. (2020). Financial & Managerial Accounting. Cengage Learning.
  • Anthony, R., Hawkins, D., & Merchant, K. (2018). Accounting: Texts and Cases. McGraw-Hill Education.
  • Benston, G. J., & Bromwich, M. (2020). Managerial Accounting for Managers. Routledge.
  • Revsine, L., Collins, D., Johnson, W., & Mittelstaedt, F. (2019). Financial Reporting & Analysis. Pearson.
  • Porterfield, D. (2018). Understanding Financial Statements. Routledge.
  • Heinti, C., & Heinti, W. (2022). Advanced Financial Accounting. Springer.

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