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The following information applies to the questions displayed below.j 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 20,870 Unearned Revenue (30 units) 5,100 Cash 11,900 Accounts Payable Jan Re 2,800 Accounts Receivable 13,500 Allowance for Doubtful Accounts Notes Payable 2,975 Contributed Capital 6,500 Inventory (35 units) Retained Earnings Feb 1, 2012 6,195 WWC establishes a policy that it will sell inventory at $165 per unit. n 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 FlFO inventory method and record COGS on a perpetual basis, February Transactions 02/01 Included in WWC's February 1Accounts 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 a 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 $380 to have the 190 units of inventory delivered overnight. Delivery 02/05 wwC paid Federal Express occurred on 02/06 02/10 Sales of 160 units of inventory occurred during the period of 02/07 0210. The sales terms are 240, 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 re from the 2005 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/O5 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 w 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 02M8 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)
