Lynn's Music Studio (Extra Credit - 10 points)

Background:

You are the manager for Lynn's Music Studio.You have been in business for about 2 years.The company is both a retailer and a service company.The company teaches piano and guitar lessons, mainly to schools and some to private individuals at both your store and at the schools.You sell guitars, keyboards, and music stands.You hired me to do your books because you want to dedicate your time to sales and growing the business.Every month on Tuesday morning at 10:30 you hold a staff meeting and go over the financial statements for the month.I pass out the Comparative Balance Sheet and Income Statement for review.Use the Need to Know to find the mistakes in my reports.

Need to Know:

The owners want accounting to be done on an accrual basis, not cash basis.

Vendors are approved by management, and are mainly music instrument-based vendors.

On January 1, the company renewed its annual insurance policy and paid the total amount at that time.

The rent for the store front is $600 per month.

The company pays the accountant and secretary through QuickBooks using an account called Staff Payroll Expense, and Staff Payroll Liability.

The company has an equal payment plan set up with the electric and the phone company.

The owner purchased a new company car in the month of April costing $23,595 that will be financed through My City Bank using a Note Payable.100% financed no money down.The car will be depreciated each month according to an IRS approved depreciation schedule for 5 years.

Typically April is the best month for revenue sales as schools prepare for graduation in May.Historically sales tail off in May and then pick up during the summer month.

You authorized the purchase of a new Printer/Scanner in May costing $900.

All fixed assets depreciate and are recorded monthly rather than at the end of the year since the amount isn't that much.The accountant records month-end depreciation expense and accumulated depreciation.

Action:

Review the two financial statements by circling accounts and dollar amounts that may be incorrect.Now in a Word document, write your concerns.For example: Why is revenue so low?Next line, why weren't funds deposited?Next line, who approved this expense account?Get the idea?Just one line per question.My job will be to head back to my office, red faced, and fix the errors.

How you earn points:

Identify and ask about at least 10 of the 21 mistakes in the two reports.You may come up with other errors not identified in my rubric.Think like a manager.Your job is to ask intelligent questions.Submit your Word Doc in Canvas by submission and attaching your Word Doc.I will give feedback on your submission, and include the points earned.

Topic: Chapter 3 Discussion X Lynn's Music Bal Sheet (1).p X Lynn's Music P&L.pdf X V 'Jurassic world' discovered ( X Homework Help - Q&A from X + X C @ File | C:/Users/dell/Downloads/Lynn's%20Music%20Bal%20Sheet%20(1).pdf G . . . 1950 - Accum. Dep., Computers -70.00 35.00 Total 1900 - Computers 2,930.00 2,965.00 Total Fixed Assets 9,270.00 9,365.00 TOTAL ASSETS 24,161.26 19,818.80 LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 2010 - Accounts Payable 5,046.00 5,850.00 Total Accounts Payable 5,046.00 5,850.00 Other Current Liabilities 0 . Notes Payable 25,595.00 2030 . Interest Payable 30.00 25,595.00 2040 . Home mortgage liability 15.00 700.00 2200 - Sales Tax Payable 217-00 350.00 23.80 Total Other Current Liabilities 26,542.00 25,983.80 Total Current Liabilities 31,588.00 31,833.80 Total Liabilities 31,588.00 31,833.80 Page 8:29 AM Lynn's Music Studio 11/21/18 Balance Sheet Accrual Basis As of May 31, 2016 May 31, 16 Apr 30, 16 Equity 3010 . Lynn Garcia, Capital 3020 . Lynn Garcia, Drawings 12,000.00 Net Income -1,500.00 12,000.00 17,926.74 -1,000.00 23,015.00 Total Equity 7,426.74 12,015.00 TOTAL LIABILITIES & EQUITY 24,161.26 19,818.80 Activate Windows Go to Settings to activate Windows. O Type here to search w 2:45 PM 9/30/2019Topic: Chapter 3 Discussion X Lynn's Music Bal Sheet (1).p X Lynn's Music P&L.pdf X V 'Jurassic world' discovered ( X Homework Help - Q&A from X + X C @ File | C:/Users/dell/Downloads/Lynn's%20Music%20P&L.pdf G . . . Lynn's Music P&L.pdf 1 / 1 8:27 AM Lynn's Music Studio 11/21/18 Profit & Loss Accrual Basis May 2016 May 16 Apr 16 Ordinary Income/Expense Income 4010 . Piano Lessons 3,290.00 2,610.00 1,470.00 20 . Guitar Lessons .080.00 4060 - Sale of Guitars 2.200.00 300.00 . Sale of Keyboards 160.00 0.00 4070 . Sale of Music Stands 400.00 40.00 4100 - Sales Discounts -10.74 Total Income 8,649.26 2,890.00 Cost of Goods Sold 5060 . Cost of Guitars Sold 1,100.00 50.00 5065 . Cost of Keyboards Sold 80.00 0.00 5070 . Cost of Music Stands Sold 200.00 20.0 Total COGS 1,380.00 70.0 Gross Profit 7,269.26 2,720.00 Expense 6010 . Auto Expense 0.00 23,595.00 6020 . Home mortgage expense 350.00 350 00 6030 - Nordstrom Expense 426.00 0.00 6075 . Dep. Exp., Music Instruments 60.00 50.00 6085 . Dep. Exp., Furniture 0.00 40.00 6095 . Dep. Exp., Computers 35.00 35.00 6150 . Instrument Tuning 50.00 100.00 6200 . Insurance Expense 100.00 6300 . Music Supplies Expense 0.00 75.00 70.00 6325 . Office Supplies Expense 50.00 50.00 400 - Rent Expense 0.00 ,200.00 6450 . Telephone Expense 70.00 50.00 6500 - Utilities Expense 50.00 70.00 Total Expense 2,166.00 25,720.00 Net Ordinary Income 5,103.26 -23,000.00 Other Income/Expense Other Expense 7000 . Interest Expense 15.00 15.00 Total Other Expense 15.00 5.00 + Net Other Income -15.00 -15.00 Net Income 5,088.26 -23,015.00 Activate Windows Go to Settings to activate Windows. O Type here to search w 2:46 PM 9/30/2019