Introductio Jones Widget Company (JWC) incorporated near the end of 2015. Operations began in January of 2016. JWC prepar adjusting entries and financial statements at the end of each month. The statements report monthly resul February 1-29, 2016 Pertinent items of general information: Beginning Balances from 1131/16 Unearned Revenue (40 units S0,000I Accounts Receivable EC9101 Accounts payable Jan Rent $1,300 Notes Payabe Contriauted Capita JWC establishes a policy that it will sell inventory at S150 per un In January, JWC received a $6,000 advance for 40 units, as reflected in Unearned Revenue. JWC's February 1 inventory balance consisted of 30 units at a total cost of $2,730 JWC's note payable accrues interest at a 10% annual rate JWC will use the FlFo inventory method and record coGS on a perpetual basis February Transactions 02/01 Included in JWC's February 1 Accounts Receivable balance is a $2,000 account due from Kit Kat, a JWC customer Kit Kat is having cash flow problems and cannot pay its balance a this time. JWC arranges with Kit Kat to convert the $2,000 balance to a note, and Kit Kat signs a 6month note, at 12% interest. The principal and all in erest will be due and payable to JWC on August 1,2016 02/02 JWC paid a $500 insurance premium covering the month of February. The amount paid is recorded directly as an expense 02/05 An additional 150 units of inventory are purchased on account by JWC for $14,100 terms 3/10, n30 FOB Destination 02/10 Sales of 110 units of inventory occurred during the period of 02/07 -02/10. The sales terms are 2/10, net 30 02/15 The advance order for 40 units from January is delivered to the customer. 02/15 20 units of the inventory that had been sold on 2/10 are returned to JWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are identified as being from the batch that was acquired on 02/05 02/16 JWC pays the first 2 weeks wages to the employees. The total paid $1,500 02/17 Paid in full the amount owed for the 02/05 purchase of inventory. 02/18 Wrote off a customers account in the amount of $700 02/19 $2,600 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 expens 02/19 Collected $4,000 on customers' Accounts Receivable. Of the $4,000, the discountwastakeD Rythe custope on $3,000 of the account balances. 02/21 A new inventory supplier that charges a lower price per unit is located JbepewsNpplietstermsace205.045EOB Sbippingvegipt, JWC purchases 50 units on account for $4,400 02/22 JWC paid Federal Express $100 to have the 50 units of inventory delivered overnight. Delivery occurred on 02/22 02/26 JWC recovered $400 cash from the customer whose account had previously been written off (see 02/18) 02/27 A$400 utility bill for February arrived. It is due on March 15 and will be paid then 02/28 JWC declared and paid a $500 cash dividend 02/28 Paid in full the amount owed for the 02/21 purchase of inventory. Adjusting entries adjusting 1) Record the $1,500 employee salary that is owed but will be paid March 02/29 02/29 (adjusting 2) JWC decides to use the aging method to estimate uncollectible accounts. JWC determines 8% of the ending accounts receivable balance is the appropriate end of February estimate of uncollectible accounts. 02/29 (adjusting 3) Record February interest expense accrued on the note payable s interest earned Kit Kat's note (see 02/01)
