Question

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	$	20,870		Unearned Revenue (30 units)	$	5,100
Accounts Receivable	$	11,900		Accounts Payable (Jan Rent)	$	2,800
Allowance for Doubtful Accounts	$	(1,650)		Notes Payable	$	13,500
Inventory (35 units)	$	2,975		Contributed Capital	$	6,500
				Retained Earnings – Feb 1, 2012	$	6,195

•	WWC establishes a policy that it will sell inventory at $165 per unit.
•	In January, WWC received a $5,100 advance for 30 units, as reflected in Unearned Revenue.
•	WWC’s February 1 inventory balance consisted of 35 units at a total cost of $2,975.
•	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 $800 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 190 units of inventory are purchased on account by WWC for $14,250 – terms 2/15, n30.
02/05	WWC paid Federal Express $380 to have the 190 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 160 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	25 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 $2,300.
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 $1,750.
02/19	$5,600 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.
02/19	Collected $9,500 of customers’ Accounts Receivable. Of the $9,500, the discount was taken by customers on $6,500 of account balances; therefore WWC received less than $9,500.
02/26	WWC recovered $550 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $700 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $950 cash dividend.

Adjusting Entries:

02/29	Record the $2,300 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).

1-a.	Prepare all February journal entries and adjusting entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1-b.	Post all February entries (transactions and adjustments) to the T-accounts.

1-c.	Prepare the financial statements at the end of February. (Balance Sheet only, items to be deducted must be indicated with a negative amount.)

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in Debit Credit Date Account $ 1,300 Feb 1 Notes Receivable $ 1,300 Feb 1 Accounts Receivable $ Feb 2 Insurance Expense 800 Feb 2 Cash 800 $ 14,250 Feb 5 Inventory Feb Payable Аccou 14,250 Feb 6 Inventory 380 Feb 6 Cash 380 $26,400 Feb 10 Accounts Receivable $ 26,400 Feb 10 Sales Revenue $12,600 Feb 10 Cost of Goods Sold (35 85)+(125*77) $12,600 Feb 10 Inventory Unearned Revenue $5,100 Feb 15 $ 5,100 Feb 15 Sales Revenue $2,310 Feb 15 Cost of Goods Sold 30*77 $ 2,310 Feb 15 Inventory $ 1,925 Feb 15 25*77 Inventory $ 1,925 Feb 15 Cost of Goods Sold $ 4,125 Sales Return and Allowances Feb 15 25*165 $4,125 Feb 15 Accounts Receivable $2,300 Feb 16 Wages Expense $ 2,300 Feb 16 Cash Accounts Payable $14,250 Feb 17 $13,965 285 14,250*2% Feb 17 Cash Feb 17 Inventory $ 1,750 Feb 18 Allowance for doubtful accounts $ 1,750 Feb 18 Accounts Receivable

Accounts Payable $2,800 Feb 19 $ 2,800 Feb 19 Rent Expense $ 5,600 Feb 19 Cash $9,370 Feb 19 Cash $6,500*2% Feb 19 Sales Discounts 130 $ 9,500 Feb 19 Accounts Receivable Feb 26 Accounts Receivable 550 Feb 26 Allowance for doubtful accounts $ 550 Cash Feb 550 Feb 26 Accounts Receivable 550 Feb 27 Utilities Expense 700 Feb 27 Accounts Payable 700 Feb 28 Dividend 950 Feb 28 Cash 950 $2,300 Feb 29a Wages Expense $ 2,300 Feb 29a Wages Payable $1,280 Feb 29b Bad Debt Expense $ 1,280 Feb 29b Allowance for doubtful accounts $13,500*12%*1/12 Feb 29c Interest Expense 135 Interest Payable $ Feb 29c 135 $1,300*12% 1/12 Feb 29d Interest Receivable 13 $ Feb 29d Interest Revenue 13 $11,900 $ 26,950 $-17,225 Beginning Accounts Receivable Addition Reduction $ 21,625 8% $ 1,730 Ending Accounts Receivable Allowane for Doubtful Accounts $ -1,650 Beginning Balance Allowance 1,750 Less: Written Off Add: Collected -550 $ 1,730 Less: Ending Balance $1,280 Bad Debt Expense to be booked

Feb Final Beginning Accounts Debit Credit Debit Credit Debit Credit Cash $14,075 6,795 $21,625 20,870 $ $9,725 Accounts Receivable 11,900 $ $ $1,730 Allowance for Doubtful Accounts 1,650 80 $ 1,360 $ $4,335 Inventory 2,975 $ Interest Receivable 13 13 $ 1,300 $1,300 5,100 $5,100 Notes Receivable $ $ Unearned Revenue Accounts Payable Note Payable $ 2,800 $ 2,100 $ 700 $ $13,500 13,500 Interest Payable $ $ 135 135 $ 2,300 $ 2,300 Wages Payable Contributed Capital Retained Earnings $ 6,500 $ 6,500 $ $6,195 6,195 $ Dividend 950 950 $ 31,500 $31,500 Sales Revenue $ $ Sales Discounts 130 130 4,125 $ 4,125 Sales Return and Allowances $ Interest Revenue 13 13 $12,985 $ 1,280 $12,985 $1,280 Cost of Goods Sold Bad Debt Expense $ Insurance Expense 800 800 $ $ Interest Expense 135 135 $ 2,800 $2,800 $ Rent Expense Utilities Expense 700 700 $ 4,600 $ 4,600 Wages Expense 35,745 $ 48,103 $48,103 $62,573 $ 62,573 $ Total 35,745 Income Statement $ Sales Revenue 31,500 Less:Sales Discounts -130 Less:Sales Return and Allowances -4,125 $ 27,245 $ 12,985 Net Sales Less: Cost of Goods Sold $14,260 Gross Profit Less: Operating Expenses Bad Debt Expense $ 1,280 $ Insurance Expense 800 $ Rent Expense 2,800 Utilities Expense $ 700 $ Wages Expense 4,600 $10,180 $ 4,080 Total Operating Expenses Net Operating Income $ Other income 13 Interest Revenue Other Expense Interest Expense -135 S122 $ 3,958 Total Other Expenses Net Income

Retained Earning Beginning Balance 6,195 Add: Net Income 3,958 Less: Dividends -950 Ending Balance 9,203 Balance Sheet Assets Current Assets: $ Cash 6,795 $ Accounts Receivable 21,625 $ Allowance for Doubtful Accounts -1,730 $ 19,895 Inventory 4,335 Interest Receivable 13 Note Receivable 1,300 $32,338 Total Assets Liabilities Current Liabilities Accounts Payable 700 Notes Payable 13,500 Interest Payable 135 Wages Payable 2,300 $ 16,635 Total Liabilities Stockholder's Equity Contributed Capital 6,500 Retained Earnings 9,203 Total Equity Total Equity and Liabilities 15,703 $ 32,338

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Cash Accounts Receivable Debit Credit Debit Credit 20,870 Feb 2 $ 800 $11,900 Feb 1 $ 26,400 Feb 15 $1,300 $4,125 Beginning Beginning Feb 10 Feb 26 $ 9,370 Feb 6 $ Feb 19 380 550 Feb 16 550 Feb 18 $ 2,300 $ $1,750 Feb 26 Feb 19 Feb 26 $13,965 $5,600 Feb 17 9,500 Feb 19 $ 550 Feb 28 950 $ 6,795 $ 21,625 Ending Ending Allowance for Doubtful Accounts Inventory Debit Credit Debit Credit $1,750 Beginning $ 12,600 $ 2,975 14,250 Feb 10 Feb 15 $1,650 Feb 18 Beginning $ 550 2,310 Feb 26 $ Feb 5 Feb 29b 380 Feb 17 $ $ 1,925 $ 1,280 Feb 6 285 Feb 15 Ending $1,730 $ 4,335 Ending Interest Recdeivable Note Receivable Debit Credit Debit Credit $1,300 Feb 29d $ Feb 1 13 1,300 $ Ending Ending 13 Accounts Payable Unearned Revenue Debit Credit Debit Credit $14,250 Beginning $2,800 Feb 5 $ 2,800 $5,100 Beginning Feb 17 $5,100 Feb 15 $14,250 Feb 19 Feb 27 $ 700 Ending Ending 700 Interest Payable Wages Payable Debit Credit Debit Credit $ Feb 29a Feb 29c 2,300 135 Ending 2,300 Ending 135 Notes Payable Contributed Payable Debit Credit Debit Credit $13,500 $6,500 Beginning Beginning $ 13,500 6,500 Ending Ending

Retained Earning Dividends Declared Debit Credit Debit Credit $6,195 $ Feb 28 950 Beginning 6,195 Ending Ending 950 Sales Revenue Sales Return and Allowance Debit Credit Debit Credit $ 4,125 $ 26,400 $ 5,100 Feb 10 Feb 15 Feb 15 Sales Discount Cost of Goods Sold Debit Credit Debit Credit $ 12,600 Feb 15 $ 2,310 $ 1,925 $ Feb 19 Feb 10 130 Feb 15 bad Debt Expense Interest Revenue Debit Credit Debit Credit $ 1,280 $ Feb 29d Feb 29b 13 Insurance Expense Interest Expense Credit Debit Debit Credit $ Feb 2 Feb 29c 800 135 Rent Expense Utility Expense Debit Credit Debit Credit $ Feb 19 Feb 27 2,800 700 wages Expense Debit Credit $2,300 $ 2,300 Feb 16 Feb 29a