Question

ASAP! This is due tonight and I am at a loss for how to do this.

Required information [The following information applies to the questions displayed below.] Wally's Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows: 4,850 Cash 0 $20120 Unearned Revenue (25 units) Accounts Payable (Jan 0 Rent) Accounts Receivable Allowance for Doubtful Accounts Inventory (30 units) $(1,400) Notes Payable $ 2,700 Contributed Capital Retained Earnings – Feb 1,6 4,420 2012 2,300 $15,000 $ 6,000 0 . WWC establishes a policy that it will sell inventory at $170 per unit. In January, WWC received a $4,850 advance for 25 units, as reflected in Unearned Revenue. WWC's February 1 inventory balance consisted of 30 units at a total cost of $2,700. . WWC's note payable accrues interest at a 12% annual rate. WWC will use the FIFO inventory method and record COGS on a perpetual basis. February Transactions Included in WWC's February 1 Accounts Receivable balance is a $1,400 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow 2104 problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,400 balance to a note, and Kit Kat signs a 6-month note, at 12% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012. WWC paid a $550 insurance premium covering the month of February. The amount paid is recorded directly as an expense. An additional 140 units of inventory are purchased on account by WWC for $10,500 - terms 2/15, n30. WWC paid Federal Express $420 to have the 140 units of inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 110 units of inventory occurred during the period of 02/07 - 02/10. The sales terms are 2/10, net 30. The 25 units that were paid for in advance and recorded in January are delivered to the customer. 10 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase. WWC pays the first 2 weeks wages to the employees. The total paid is 02/16 $3,200. Paid in full the amount owed for the 2/05 purchase of inventory. WWC 02/17 records purchase discounts in the current period rather than as a reduction of inventory costs. 02/18 Wrote off a customer's account in the amount of $1,500. $4,600 of rent for January and February was paid. Because all of the 02/19 rent will soon expire, the February portion of the payment is charged directly to expense. Collected $9,000 of customers' Accounts Receivable. Of the $9,000, the 02/19 discount was taken by customers on $5,500 of account balances; therefore WWC received less than $9,000. WWC recovered $500 cash from the customer whose account had previously been written off (see 02/18). 2 7A $450 utility bill for February arrived. It is due on March 15 and will be paid then. 02/28WWC declared and paid a $450 cash dividend. Adjusting Entries: Record the $3,200 employee salary that is owed but will be paid March WWC decides to use the aging method to estimate uncollectible 02/29accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts. 02/29Record February interest expense accrued on the note payable. 02/29 Record one month's interest earned Kit Kat's note (see 02/01).

Feb. 1: Included in WWC’s February 1 Accounts Receivable balance is a $1,500 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,400 balance to a note, and Kit Kat signs a 6-month note, at 12% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012.

Feb 2: WWC paid a $550 insurance premium covering the month of February. The amount paid is recorded directly as an expense

Feb 5: An additional 140 units of inventory are purchased on account by WWC for $10,500 – terms 2/15, n30.

Feb 6: WWC paid Federal Express $420 to have the 140 units of inventory delivered overnight. Delivery occurred on 02/06.

Feb 10a: Record the sales of 110 units of inventory.

Feb 10b: Record the cost of goods sold for 110 units.

Feb 15a: Record the unearned revenue for 25 units paid in advance.

Feb 15b: Record the cost of goods sold for 25 units.

Feb 15c: Record the 10 units of inventory returned

Feb 15d: Record the sales return and allowance.

Feb 16: WWC pays the first 2 weeks wages to the employees. The total paid is $3,200.

Feb 17: Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs.

Feb 18: Wrote off a customer’s account in the amount of $1,500.

Feb 19a: $4,600 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense.

Feb 19b: Collected $9,000 of customers’ Accounts Receivable. Of the $9,000, the discount was taken by customers on $5,500 of account balances; therefore WWC received less than $9,000.

Feb 26a: Record the entry to reversal of allowance for doubtful accounts.

Feb 26b: Record the entry to recovered $500 cash from the customer.

Feb 27: A $450 utility bill for February arrived. It is due on March 15 and will be paid then.

Feb 28: WWC declared and paid a $450 cash dividend.

Feb 29a: Record the $3,200 employee salary that is owed but will be paid March 1.

Feb 29b: WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts.

Feb 29c: Record February interest expense accrued on the note payable.

Feb 29c: Record one month’s interest earned Kit Kat’s note (see 02/01).

Answer 1

Wally’s Widget Company (WWC)
Journal entries
Date	Account	Debit	Credit
Feb 1.	Note Receivable	1,400
	Accounts Receivable		1,400
Feb 2.	Insurance expense	550
	Cash		550
Feb 5.	Inventory	10,500		=10,500/140 = 75 per unit
	Accounts Payable		10,500	2/15, n30
Feb 6.	Inventory	420		=420/140 = 3 per unit
	Cash		420
Feb 10a	Accounts Receivable	18,700		=110*170
	Sales Revenue		18,700
Feb 10b	Cost of goods sold	8,940		=2700+(80*(75+3))
	Inventory		8,940
Feb 15a	Unearned Revenue	4,850
	Sales Revenue		4,850
Feb 15b	Cost of goods sold	1,950		=25*(75+3)
	Inventory		1,950
Feb 15c	Inventory	780		=10*(75+3)
	Cost of goods sold		780
Feb 15d	Sales Returns and Allowance	1,700		=10*170
	Accounts Receivable		1,700
Feb 16.	Wages expense	3,200
	Cash		3,200
Feb 17.	Accounts Payable	10,500
	Cash		10,290
	Inventory		210	=10,500*2%
Feb 18.	Allowance for doubtful accounts	1,500
	Accounts Receivable		1,500
Feb 19a	Rent expense	2,300
	Accounts Payable	2,300
	Cash		4,600
Feb 19b	Cash	8,890		=(9,000-5,500)+(5,500*98%)
	Sales discount	110		=5,500*2%
	Accounts Receivable		9,000
Feb 26a	Accounts Receivable	500
	Allowance for doubtful accounts		500
Feb 26b	Cash	500
	Accounts Receivable		500
Feb 27.	Utility expense	450
	Accounts Payable		450
Feb 28.	Dividend declared	450
	Cash		450
Adjusting entries
Feb 29a	Wages expense	3,200
	Wages Payable		3,200
Feb 29b	Bad debts expense	900		Workings below
	Allowance for doubtful accounts		900
Feb 29c	Interest expense	150		=15,000*12%*1/12
	Interest Payable		150
Feb 29d	Interest Receivable	14		=1,400*12%*1/12
	Interest revenue		14
Closing entries
Date	Account	Debit	Credit
CJE 1	Sales Revenue	23,550
	Interest revenue	14
	Sales Returns and Allowance		1,700
	Sales discount		110
	Retained Earnings		21,754
CJE 2	Retained Earnings	20,860
	Cost of goods sold		10,110
	Bad debts expense		900
	Insurance expense		550
	Interest expense		150
	Rent expense		2,300
	Utility expense		450
	Wages expense		6,400
CJE 3	Retained Earnings	450
	Dividend declared		450
	Workings
	Allowance for doubful debts
	Opening balance - Allowance	1,400	credit
Feb 18.	Write off	(1,500)	debit
Feb 26a	Cash recovered	500	credit
Feb 29.	Unadjusted Balance	400	credit
	Adjusted Balance @ 8% of AR	1,300	credit	=16,250*8%
	Bad debt expense	900		=1,300-400

Credit $ 8,940 Wally's Widget Company (wwc) T Accounts Date Debit Date Credit Date Cash Op bal $ 20,120 Feb 2. $ 550 Op bal Feb 19 $ 8,890 Feb 6. $ 420 Feb 10a Feb 16. $ 3,200 Feb 17. $ 10,290 Feb 19a $ 4,600 Feb 26a Feb 26b $ 500 Feb 28. $ 450 Debit Date Credit Accounts Receivable $11,150 Feb 1. $ 1,400 $ 18,700 Feb 150 $ 1,700 Feb 18. $ 1,500 Feb 19b $ 9,000 $ 500 Feb 26b $ 500 Date Debit D ate Credit Date Allowance for Doubtful Accounts Feb 18. $1,500 Op bal $ 1,400 Op bal Feb 26a $ 500 Feb 5. Feb 295 $ 900 Feb 6. Feb 150 Debit Date Inventory $ 2,700 Feb 10a $ 10,500 $ 420 $ 780 Feb 15b Feb 17. $ 1,950 $ 210 Bal. Bal. $ 1,300 Bal. $ 10,000 Notes Receivable $ 1,400 $ 16,250 Interest Receivable $ 14 $ 3,300 Unearned Revenue $ 4,850 Op bal Feb 1. Bal. Accounts Payable Op bal $ 10,500 Feb 5. $ 2,300 Feb 27. Feb 290 Feb 15a $ 4,850 Feb 17. Feb 19a $ 2,300 $ 10,500 $ 450 Bal. $ Bal. $ 14 Bal. $ 450 $ - 1,400 Wages Payable Feb 29a Notes payable Op bal Interest payable Feb 290 Contributed Capital Op bal $ 3,200 $ 150 $15,000 $ 6,000 $ 3,200 $ 150 Bal. Retained Earnings $ 20,860 Op bal $ 450 CIE 1 Bal. Dividend 450 CJE 3 Bal. Sales Revenue $ 23,550 Feb 10a Feb 15a $ 15,000 Bal. $ 6,000 Sales Returns & Allowances $ 18,700 Feb 15d $ 1,700 CJE1 $ 1,700 $ 4,850 Feb 28. $ $ 450 CJE1 CJE 2 CJE 3 $ 4,420 $ 21,754 $ 4,864 Bal. $ - Bal. Bal. Sales discounts 110 CJE1 $ . Cost of goods sold $ 8,940 Feb 150 $ 1,950 CJE 2 Bal. Interest Revenue $ 14 Feb 290 $ 1,700 Bad Debt expense $ 900 CJE 2 Feb 19 $ $ 110 CJE1 $ 14 Feb 295 $ 900 Feb 10b Feb 15b $ $ 780 10,110 Bal. Bal. $ - Bal. $ . Insurance expense $ 550 CJE 2 Bal. Rent expense $ 2,300 CJE 2 $ - Utility expense $ 450 CJE2 Feb 2. $ Interest expense $ 150 CJE 2 550 Feb 290 $ 150 Feb 19a $ 2,300 Feb 27. $ 450 Bal. Bal. S - Bal. $ . Bal. $ .. $ . Wages expense $ 3,200 CJE 2 $ 3,200 $ 6,400 Feb 16. Feb 29a Bal. $ .

Adjusted TB Debit Credit 10,000 16,250 1,300 3,300 1,400 14 450 3,200 150 Wally's Widget Company (WWc) Account Names Cash Accounts Receivable Allowance for doubtful accounts Inventory Note Receivable Interest Receivable Accounts Payable Unearned Revenue Wages Payable Interest Payable Notes Payable Contributed Capital Retained Earnings Dividend declared Sales Revenue Sales Returns and Allowance Sales discount Cost of goods sold Interest revenue Bad debts expense Insurance expense Interest expense Rent expense Utility expense Wages expense Totals 15,000 6,000 4,420 450 23,550 1,700 110 10,110 900 550 150 2,300 450 6,400 54,084 54,084