Project 2: Review of Merchandising Cycle [The following information applies 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 and financial statements at the end of each month. Balances in the accounts at the end of January are as follows: Cash Accounts Receivable Allowance for Doubtful Accounts $(1000) Notes Payable Inventory (35 units) $ 18,920 Unearned Revenue (30 units) $ 9,950 Accounts Payable (Jan Rent) $4,450 $1,500 $14,500 5,200 Retained Earnings - Feb 1, 20125,020 $2,800 Contributed Capital . WWC establishes a policy that it will sell inventory at $165 per unit. In January, WWC received a $4,450 advance for 30 units, as reflected in Unearned Revenue. . WWC's February 1 inventory balance consisted of 35 units at a total cost of $2,800 . 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 $1,700 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 $1.700 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 $600 insurance premium covering the month of February. The amount paid is recorded directly as an expense WWC for $9,750- terms 2/15, n30. 02/05 An additional 130 units of inventory are purchased on account by 02/05 wwC paid Federal Express $260 to have the 130 units of i 02/10 Sales of 100 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 custom occurred on 02/06. 2/10, net 30 15 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 02/15 02/16 WWC pays the first 2 weeks wages to the employees. The total paid is $2,400. 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