1

Included in WWCs 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.

2

WWC paid a $650 insurance premium covering the month of February. The amount paid is recorded directly as an expense.

3

An additional 180 units of inventory are purchased on account by WWC for $13,500 terms 2/15, n30.

4

WWC paid Federal Express $360 to have the 180 units of inventory delivered overnight. Delivery occurred on 02/06.

5

Record the sales of 150 units of inventory.

6

Record the cost of goods sold for 150 units.

7

Record the unearned revenue for 30 units paid in advance.

8

Record the cost of goods sold for 30 units.

9

Record the 25 units of inventory returned

10

Record the sales return and allowance.

11

WWC pays the first 2 weeks wages to the employees. The total paid is $2,800.

12

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.

13

Wrote off a customers account in the amount of $2,000.

14

$6,600 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.

15

Collected $10,000 of customers Accounts Receivable. Of the $10,000, the discount was taken by customers on $8,000 of account balances; therefore WWC received less than $10,000.

16

Record the entry to reversal of allowance for doubtful accounts.

17

Record the entry to recovered $600 cash from the customer.

18

A $950 utility bill for February arrived. It is due on March 15 and will be paid then.

19

WWC declared and paid a $950 cash dividend.

20

Record the $2,800 employee salary that is owed but will be paid March 1.

21

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.

22

Record February interest expense accrued on the note payable.

23

Record one months interest earned Kit Kats note (see 02/01).

No	Date	General Journal	Debit	Credit
1	Feb. 1	Notes Receivable	1,400
1		Accounts Receivable		1,400
2	Feb. 2	Insurance Expense	650
2		Cash		650
3	Feb. 5	Inventory	13,500
3		Accounts Payable		13,500
4	Feb. 6	Inventory	360
4		Cash		360
5	Feb. 10a	Accounts Receivable
5		Sales Revenue
6	Feb. 10b	Cost of Goods Sold
6		Inventory
7	Feb. 15a	Unearned Revenue
7		Sales Revenue
8	Feb. 15b	Cost of Goods Sold
8		Inventory
9	Feb. 15c	Inventory
9		Cost of Goods Sold
10	Feb. 15d	Sales Returns and Allowance
10		Accounts Receivable
11	Feb. 16	Wages Expense	2,800
11		Cash		2,800
12	Feb. 17	Accounts Payable
12		Cash
12		Inventory
13	Feb. 18	Allowance for Doubtful Accounts
13		Accounts Receivable
14	Feb. 19a	Accounts Payable
14		Rent Expense
14		Cash
15	Feb. 19b	Cash
15		Sales Discounts
15		Accounts Receivable
16	Feb. 26a	Accounts Receivable
16		Allowance for Doubtful Accounts
17	Feb. 26b	Cash	600
17		Accounts Receivable		600
18	Feb. 27	Utility Expense	950
18		Accounts Payable		950
19	Feb. 28	Dividends Declared	950
19		Cash		950
20	Feb. 29a	Wages Expense	2,800
20		Wages Payable		2,800
21	Feb. 29b	Bad Debt Expense
21		Allowance for Doubtful Accounts
22	Feb. 29c	Interest Expense
22		Interest Payable
23	Feb. 29d	Interest Receivable
23		Interest Revenue

Project 2: Review of Merchandising Cycle The following Information applles 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 ond financial statements ot the end of each month. Bolances in the occounts at the end of January are as follows: Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (35 units) S 21,620 Uneamed Revenue (30 units) 12,650 Accounts Payable (Jan Rent) (1,900) Notes Payable 2,800 Contributed Copitel S 5,350 S 3.300 $16,000 Retained Earnings - Feb 1, 2012 S 3,520 WWC establishes a policy that it will sell inventory at $180 per unit. . In January, WWC received a $5,350 advance for 30 units, as reflected in Uneorned Revenue WWC's February 1 inventory balance consisted of 35 units at a total cost of $2.800 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 $1,400 account due from Kit Kat, a WWC customer. Kit Kat is having cosh flow problems ond 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 02/02 wWC paid a $650 insurance premium covering the month of February. The amount paid is recorded 02/05 An additional 180 units of inventory are purchased on account by WWC for $13,500 - terms 2/15 02/05 wWC paid Federal Express $360 to have the 180 units of inventory delivered overnight. Delivery 02/10 Sales of 150 units of inventory occurred during the period of 02/07 02/10. The sales terms are 02/15 The 30 units that were paid for in advance and recorded in January are delivered to the customer. directly os an expense n30 occurred on 02/06 2/10, net 30 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 $2,800. 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 $2,000. 02/19 $6,600 of rent for January and February was paid. Becouse all of the rent will soon expire, the 02/19 Collected $10,000 of customers' Accounts Receivable. Of the $10,000, the discount was taken by 02/26 wWC recovered $600 cash from the customer whose account had previously been written off (see 02/27 A $950 utility bill for February arrived. It is due on March 15 and will be paid then. February portion of the payment is charged directly to expense customers on $8,000 of account balances; therefore WWC received less than $10,000 02/18). 02/28 wWC declared and paid a $950 cash dividend. Adjusting Entries: 02/29 Record the $2,800 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 occounts. ued on the note payable 02/29 Record February interest expense occr 02/29 Record one month's interest earned Kit Kat's note (see 02/01)