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: Unearned Revenue (35 units) Notes Payable Retained Earnings-Feb 1,2012 5,520 5 4750 s 2300 $ 14,000 s 5,800 19,820 $10850 Accounts Payable (Jan Rent Cash Allowance for Doubtful Accounts Inventory (40 units) 300) $ 2,800 Contributed Capital WWC establishes a policy that it will sell inventory at $150 per unit. In January, WWC received a $4,750 advance for 35 units, as reflected in Unearned Revenue WWC's February 1 inventory balance consisted of 40 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 $1,400 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 $1,400 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 $450 insurance premium covering the month of February. The amount paid is recorded directly as an expense 0205 An additional 190 units of inventory are purchased on account by WWC for $14,250-terms 2/15, n30. 02/05 WWC paid Federal Express $380 to have the 190 units of inventory delivered overnight. Delivery occurred on 02/06