Generally Accepted Accounting Principles and Guitar Universe

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Final Project
ACC-101

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Comprehensive Problem 2
Guitar Universe, Inc. P388

GUITAR UNIVERSER, INC.|
Trial Balance|
December 31,2009|
Cash| $45,000|  |
Marketable securities| $25,000|  |
Accounts receivable| $125,000|  |
Allowance for doubtful accounts|  | $5,000|
Merchandise inventory| $250,000|  |
Office Supplies| $1,200|  |
Prepaid insurance| $6,600|  |
Building and fixtures| $1,791,000|  |
Accumulated depreciation|  | $800,000|
Land| $64,800|  |
Accounts payable|  | $70,000|
Unearned customer deposits|  | $8,000|
Income taxes payable|  | $75,000|
Capital stock|  | $1,000,000|
Retained earnings|  | $240,000|
Unrealized holding gain on investments|  | $6,000|
Sales|  | $1,600,000|
Cost of goods sold| $958,000|  |
Bank service charges| $200|  |
Uncollectible accounts expense| $9,000|  |
Salary and wages expense| $395,000|  |
Office supplies expense| $400|  |
Insurance expense| $6,400|  |
Utilities expense| $3,600|  |
Depreciation expense| $48,000|  |
Income tax expense| $75,000|  |
Total| $3,804,200| $3,804,000|

a)
GUITAR UNIVERSE, INC.|
BANK RECONCILIATION|
For: December 31, 2009|
Balance per bank statement, December 31, 2009| $46,975|
Add: Deposits in Transit| | | $16,500|
 | | | | $63,475|
Deduct: Outstanding Checks:| | |  |
 | | No. 507| $4,000|  |
 | | No. 511| $9,000|  |
 | | No. 521| $8,000| $21,000|
Adjusted cash balance| | | $42,475|
Balance per depositor's records, Dec 31,2009| | $45,000| Deduct:| | | |  |
 | Bank Service Charge| $25|  |
 | NSF check from Iggy Bates| $2,500| $2,525|
Adjusted cash balance|  |  | $42,475|

GUITAR UNIVERSE, INC.|
General Journal|
Bank Service Charges| $25|  |
Accounts Receivable (Iggy Bates)| $2,500|  |
Cash| $2,525|
To record bank charges (service charge);
To record NSF check received from customer Iggy Bates|

b)
GUITAR UNIVERSE, INC.|
General Journal|
Marketable Securities| $2,500|  |
Unrealized holding gain on investments| $2,500|
To record increase in Marketable securities
from $25,000 reported in the company's trial balance to $27,500; 27,500-25,000 = $2,500.
The initial investment in the portfolio was $19,000.|

c)
GUITAR UNIVERSE, INC.|
General Journal|
Uncollectible Accounts Expense| $3,500|  |
Allowance for Doubtful Accounts| $3,500|
To record Uncollectible Accounts Expense:
Reported Allowance for doubtful accounts: 5000;
An allowance for doubtful accounts of 8500 needed at Dec 31. 8500-5000=3500=$3,500=> expense-increase in allowance for doubtful accounts.|
d)
GUITAR UNIVERSE, INC.|
General Journal|
Cost of Goods Sold| $1,350|  |
Inventory| $1,350|
To record inventory shrinkage of the missing units amounted to $1,350.|

e)
GUITAR UNIVERSE, INC.|
General Journal|
Office Supplies Expense| $300|  |
Office Supplies| $300|
To record office supplies expense in December.
Reported -remained office supplies:1200;
At Dec 31, approximately $900 in office supplies remained on hand: 1200-900=$300- office supplies expense in December|

f)
GUITAR UNIVERSE, INC.|
General Journal|
Insurance Expense| $600|  |
Prepaid Insurance| $600|
To record insurance expense for December;
Calculation: 12 months insurance was prepaid in Nov.
$6,600 is currently reported in assets as prepaid insurance (1 month used in Nov); 6600/11 = $600 insurance expense per month.|

g)
GUITAR UNIVERSE, INC.|
General Journal|
Depreciation Expense| $5,000|  |
Accumulated depreciation| $5,000|
To record December depreciation expense of $5,000 related to the company's building & fixtures|

h)
GUITAR UNIVERSE, INC.|
General Journal|
Unearned Customer Deposits| $3,200|  |
Sales| $3,200|...
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