In Chapter 2 In a Set of Financial Statements, What Information Is Conveyed about Receivables?, you prepared Webworks statements for July. They are included here as a starting point for August.

Here are Webworks financial statements as of July 31.

The following events occur during August:

a. Webworks decides to begin selling a limited selection of inventory items related to its business. During August, Webworks purchases specialty keyboards for $4,900 on account and flash drives for $3,200 on account with the hopes of selling them to its Web site customers or others who might be interested. Due to the limited amount of inventory, Webworks will use a periodic system. Record these purchases.

b. Webworks purchases supplies worth $100 on account.

c. Webworks starts and completes six more Web sites and bills clients for $2,700.

d. Recall that in July, Webworks received $500 in advance to design two Web sites. Webworks completes these sites during August.

e. Webworks collects $2,400 in accounts receivable.

f. Webworks pays Nancy $600 for her work during the first three weeks of August.

g. In June, Webworks designed a site for Pauline Smith and billed her. Unfortunately, before she could finish paying the bill, Ms. Smiths business folded. It is unlikely Webworks will collect anything. Record the entry to write off the $100 remaining receivable from Ms. Smith.

h. Webworks sells keyboards for $4,500 and flash drives for $3,000 cash.

i. Webworks pays off its salaries payable from July.

j. Webworks pays off $6,000 of its accounts payable.

k. Webworks receives $100 in advance to work on a Web site for a local dentist. Work will not begin on the Web site until September.

l. Webworks pays Leon salary of $2,000.

m. Webworks pays taxes of $475 in cash.

Required:

A. Prepare journal entries for the above events.

B. Post the journal entries to T-accounts.

C. Prepare an unadjusted trial balance for Webworks for August.

D. Prepare adjusting entries for the following and post them to your T-accounts.

n. Webworks owes Nancy $250 for her work during the last week of August.

o. Leons parents let him know that Webworks owes $250 toward the electricity bill. Webworks will pay them in September.

p. Webworks determines that it has $60 worth of supplies remaining at the end of August.

q. Prepaid rent should be adjusted for Augusts portion.

r. Webworks is continuing to accrue bad debts at 10 percent of accounts receivable.

s. Webworks performs a count of ending inventory and determines that $1,900 in keyboards and $1,100 in flash drives remain. Record cost of goods sold.

E. Prepare an adjusted trial balance.

F. Prepare financial statements for August.

Above, you prepared Webworks statements for August.

The following events occur during September:

a. Webworks purchases supplies worth $120 on account.

b. At the beginning of September, Webworks had 19 keyboards costing $100 each and 110 flash drives costing $10 each. Webworks has decided to use perpetual FIFO to cost its inventory.

c. On account, Webworks purchases thirty keyboards for $105 each and fifty flash drives for $11 each.

d. Webworks starts and completes five more Web sites and bills clients for $3,000.

e. Webworks pays Nancy $500 for her work during the first three weeks of September.

f. Webworks sells 40 keyboards for $6,000 and 120 flash drives for $2,400 cash.

g. Webworks collects $2,500 in accounts receivable.

h. Webworks pays off its salaries payable from August.

i. Webworks pays off $5,500 of its accounts payable.

j. Webworks pays off $5,000 of its outstanding note payable.

k. Webworks pays Leon salary of $2,000.

l. Webworks pays taxes of $795 in cash.

Required:

A. Prepare journal entries for the above events.

B. Post the journal entries to T-accounts.

C. Prepare an unadjusted trial balance for Webworks for September.

D. Prepare adjusting entries for the following and post them to your T-accounts.

m. Webworks owes Nancy $300 for her work during the last week of September.

n. Leons parents let him know that Webworks owes $275 toward the electricity bill. Webworks will pay them in October.

o. Webworks determines that it has $70 worth of supplies remaining at the end of September.

p. Prepaid rent should be adjusted for Septembers portion.

q. Webworks is continuing to accrue bad debts so that the allowance for doubtful accounts is 10 percent of accounts receivable.

E. Prepare an adjusted trial balance.

F. Prepare financial statements for September.

Webworks Balance Sheet July 31 Assets Liabilities $5,720 1,050 Current Cash Accounts Receivable Less Allowance for Doubtful Accounts Net Accounts Receivable Supplies Inventory Prepaid Rent Total Current Assets Current Accounts Payable Salaries Payable Unearned Revenue Total Current Liabilities $240 200 500 $940 (105) 945 50 400 $7,115 Noncurrent Equipment $7,000 Noncurrent Notes Payable $10,000 Owners' Equity Capital Stock Retained Earnings Total Owners' Equity $2,000 1,175 $3,175 Total Liabilities & Owners' Equity Total Assets $14,115 $14,115 Webworks Income Statement As of July 31 Revenue Expenses Earning before Tax Tax Expense Net Income $2,300 (1,295) 1,005 (300) $705 Webworks Stmt. Of Retained Earnings As of July 31 Retained Earnings, July 1 Net Income Retained Earnings, July 31 $470 705 $1,175