Question

Need Journal entries please

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:

Cash	$	19,670		Unearned Revenue (30 units)	$	4,700
Accounts Receivable	$	10,700		Accounts Payable (Jan Rent)	$	2,000
Allowance for Doubtful Accounts	$	(1,250)		Notes Payable	$	13,500
Inventory (35 units)	$	2,450		Contributed Capital	$	5,700
				Retained Earnings – Feb 1, 2012	$	5,670

Need Journal entries please

WWC establishes a policy that it will sell inventory at $155 per unit.
In January, WWC received a $4,700 advance for 30 units, as reflected in Unearned Revenue.
WWC’s February 1 inventory balance consisted of 35 units at a total cost of $2,450.
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
02/01	Included in WWC’s February 1 Accounts Receivable balance is a $1,300 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 $1,300 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.
02/02	WWC paid a $400 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 180 units of inventory are purchased on account by WWC for $13,500 – terms 2/15, n30.
02/05	WWC paid Federal Express $360 to have the 180 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 150 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
02/15	The 30 units that were paid for in advance and recorded in January are delivered to the customer.
02/15	20 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.
02/16	WWC pays the first 2 weeks wages to the employees. The total paid is $2,900.
02/17	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.
02/18	Wrote off a customer’s account in the amount of $1,350.
02/19	$4,000 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.
02/19	Collected $8,700 of customers’ Accounts Receivable. Of the $8,700, the discount was taken by customers on $4,000 of account balances; therefore WWC received less than $8,700.
02/26	WWC recovered $470 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $850 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $700 cash dividend.

Adjusting Entries:

02/29	Record the $2,900 employee salary that is owed but will be paid March 1.
02/29	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.
02/29	Record February interest expense accrued on the note payable.
02/29	Record one month’s interest earned Kit Kat’s note (see 02/01).

Answer 1

Date	Particulars	Dr($)	Cr($)
01-Feb	12% 6 months Note Receivable (Kitkat) DR	1300
	To Accounts Receivable (Kitkat)		1300
02-Feb	P&L (Insurance Expense) Dr	400
	To cash		400
05-Feb	Purchase (Inventory-180 units) DR	13500
	To Accounts Payable		13500
05-Feb	Freight Inward (Federal Express) Dr	360
	To Cash		360
10-Feb	Accounts Receivable DR	23500
	To Sales (Inventory -150 units)		23500
	($4700 for 30 units. So $23500 for 150 units)
15-Feb	Unearned Revenue Dr	4700
	To Sales		4700
15-Feb	Sales Return Dr	3133.33
	To Accounts Receivable		3133.33
	Inventory Dr.	1500
	P&L Dr	1633.33
	To Sales Return		3133.33
16-Feb	Wages Dr	2900
	To Cash		2900
17-Feb	Accounts Payable Dr	13500
	To Cash		13230
	To Discount		270
18-Feb	Bad Debts Dr	1350
	To Accounts Receivable		1350
19-Feb	Accounts Payable (Jan Rent) Dr	2000
	P&L Dr	2000
	To Cash		4000
26-Feb	Cash Dr	470
	To Bad Debt Recovered		470
27-Feb	Utility Expense Dr	850
	To Accounts Payable		850
28-Feb	Dividend Dr	700
	To Cash		700
	P&L Dr	700
	To Dividend		700
29/02	Wages Dr	2900
	To Wages Payable		2900
29/02	Bad Debts DR	2273.33
	To Accounts Receivable		2273.33
	(See Note)
29/02	Interest Expense on Note Payable Dr	135
	To Interest Payable		135
	(13500*12%*1/12)
29/02	Interest Receivable Dr	13
	To Interest Income on Note Receivable		13
	(1300*12%*1/12)

Note : Calculation of Closing Balance of Accounts Receivable :

Accounts Receivable Balance at Feb End :
Opening	10,700
01-Feb	-1300
10-Feb	23500
15-Feb	-3133.33
18-Feb	-1350
Closing	28,417