cuns. The company's accountants make adjusting entries monthly, and they make all closing Music is Us, Inc., is a supplier of musical instruments for professional and amateur musi- cores annually. The company is growing rapidly and prides itself on having no long-term The company has provided the following trial balance dated December 31, 2018. Daher information pertaining to the company's trial balance is provided as follows. Music-Is-Us, Inc. MUSIC-IS-US, INC. TRIAL BALANCE DECEMBER 31, 2018 $ 45,000 25,000 125.000 $ 5,000 Cash Marketable securities. Accounts receivable Allowance for doubtful accounts Merchandise inventory Office supplies Prepaid insurance Building and fixtures Accumulated depreciation. Land Accounts payable Unearned customer deposits 250,000 1.200 6,600 1.791,000 800.000 64,800 70,000 8.000 75,000 1.000.000 240.200 6.000 1.600,000 Income taxes payable. Capital stock Retained earnings Urealized holding gain on investments. Sales Cost of goods sold Bank service charges Uncollectible accounts expense Salary and wages expense Orice supplies expense. 958,000 200 9,000 395,000 400 6,400 3,600 48.000 75,000 $3,804,200 Insurance expense Utilities expense Depreciation expense Income tax expense $3,804,200 Other information pertaining to the company's trial balance is provided as follows. 1. The most recent bank statement reports a balance of $46,975. Included with the bank statement was a $2,500 check from Iggy Smarts, a professional musician, charged back to Music-Is-Us as NSF. The bank's monthly service charge was $25. Three checks writ- ten by Music-Is-Us to suppliers of merchandise inventory had not yet cleared the bank for payment as of the statement date. These checks included: no. 508, $5,500: no. 511, ther in the current bunk statement. The company prepares a bank reconciliation at the end our December 31, the market value of these securities was $27,500. All short-term inwear ments are classified as "available for sale." 3. During December. $6,400 of accounts receivable were written off as uncollectible. A recent aging of the company's accounts receivable led management to conclude that in allowance for doubtful accounts of $8.500 is needed at December 31, 2018 4. The company uses a perpetual inventory system. A year-end physical count revealed the several guitars reported in the inventory records were missing. The cost of the missing units amounted to $1.350. This amount is not considered significant relative to the total cost of inventory on hand. 5. At December 31, approximately $900 in office supplies remained on hand. 6. The company pays for its insurance policies 12 months in advance. Its most recent per ment was made on November 1, 2018. The cost of this policy was slightly higher than the cost of coverage for the previous 12 months. 7. Depreciation expense related to the company's building and fixtures is $5,000 for the month ending December 31, 2018. 8. Although Music-Is-Us carries an extensive inventory. it is not uncommon for experienced musicians to order custom guitars made to their exact specifications. Manufacturers de $7.500; and no. 521. 58.000. Deposits of $16,500 reached the bank too late for inclusion 2. Music-Is-Us has a portfolio of marketable securities that originally cost $19.000. As of not allow any sales returns of custom-made guitars. The entire sales amount is collected at the time a custom order is placed, and is credited to an account entitled "Umeared 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. The cost of goods sold and the reduction in inventory associated with all custom orders is recorded when the custom merchandise is delivered to customers. At that time, the adjusting entry 9. Accrued income taxes payable for the entire year ending December 31, 2018, al $81.000. No income tax payments are due until early in 2019. requires only a decrease to unearned customer deposits and an increase in sales Instructions of the year. i. Prepare the adjusting entry to account for income tax expense that accrued during December j. On the basis of the adjustments made to the accounting records in parts a through i, prepare k. Using the adjusted trial balance prepared in part ), prepare an annual income statement, state- Instructions a. Prepare a bank reconciliation and make the journal entries to update the accounting records of Music-Is-Us as of December 31, 2018. b. Prepare the adjusting entry to update the company's marketable securities portfolio to its mark-to-market value. c. Prepare the adjusting entry at December 31, 2018. to report the company's accounts receiv able at their net realizable value (i.e., total amount receivable, less estimated allowance fine uncollectible accounts). d. Prepare the entry to account for the guitars missing from the company's inventory at the end e. Prepare the adjusting entry to account for the office supplies used during December. f. Prepare the adjusting entry to account for the expiration of the company's insurance policies during December g. Prepare the adjusting entry to account for the depreciation of the company's building and fixtures during December. h. Prepare the adjusting entry to report the portion of unearned customer deposits that were earned during December the company's adjusted trial balance at December 31, 2018. ment of retained earnings, and a balance sheet dated December 31, 2018. 1. Using the financial statements prepared in part k, determine approximately how many days on average an account receivable remains outstanding before it is collected. You 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. Using 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. You 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. 1. Using the financial statements prepared in part k, determine approximately how many days it takes to convert the company's inventory into cash. In other words, what is the length of the company's operating cycle? 0, Comment briefly upon the company's financial condition from the perspective of a short-term creditor