$ 4,400 $ 1,400 $14,000 $ 5,100 $ 5120 $ 18,770 Unearned Revenue (25 units) $ 9,800 Accounts Payable (Jan Rent) Cash Accounts Receivable Allowance for Doubtful Accounts (950) Notes Payable Inventory (30 units) $ 2,400 Contributed Capital Retained Earnings- Feb 1, 2012 wwc establishes a policy that it will sell inventory at $160 per unit. In January, WWC received a $4,400 advance for 25 units, as reflected in Unearned Revenue WWC's February 1 inventory balance consisted of 30 units at a total cost of $2,400 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 $1,600 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 $1,600 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 $550 insurance premium covering the month of February. The amount paid is recorded 02/05 An additional 120 units of inventory are purchased on account by WWC for $9,000 erms 2/15, 02/05 WWC paid Federal Express $240 to have the 120 units of inventory delivered overnight. Delivery 02/10 Sales of 90 units of inventory occurred during the period of 02/07 - 02/10. The sales terms are 2/10, 02/15 The 25 units that were paid for in advance and recorded in January are delivered to the customer. directly as an expense n30. occurred on 02/06 net 30. 02/15 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 02/16 WWC pays the first 2 weeks wages to the employees. The total paid is $2,300 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. 02/17 02/18 Wrote off a customer's account in the amount of $1,050. 02/19 $2,800 of rent for January and February was paid. Because all of the rent will soon expire, the 02/19 Collected $8100 of customers' Accounts Receivable. Of the $8,100, the discount was taken by 02/26 WWC recovered $410 cash from the customer whose account had previously been written off (see 02/27 A $550 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 $4,000 of account balances; therefore WWC received less than $8,100. 02/18). 02/28 WWC declared and paid a $700 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 10% 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)