Project 2 Review of Merchandising Cycle The following information applies to the questions displayed below Wallys 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 $ 19,970 Unearned Revenue (40 units) $ 4,800 Accounts Receivable $ 11,000 Accounts Payable (Jan Rent) $ 2,200 Allowance for Doubtful Accounts $ (1,350) Notes Payable $ 14,500 Inventory (45 units) $ 3,150 Contributed Capital $ 5,900 Retained Earnings Feb 1, 2012 $ 5,370 WWC establishes a policy that it will sell inventory at $165 per unit In January, WWC received a $4,800 advance for 40 units, as reflected in Unearned Revenue WWCs February 1 inventory balance consisted of 45 units at a total cost of $3,150 WWCs 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 WWCs February 1 Accounts Receivable balance is a $1,500 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 $1,500 balance to a note, and Kit Kat signs a 6 month note, at 10 annual interest The principal and all interest will be due and payable to WWC on August 1, 2012 02 02 WWC paid a $500 insurance premium covering the month of February The amount paid is recorded directly as an expense 02 05 An additional 200 units of inventory are purchased on account by WWC for $15,000 terms 2 15, n30 02 05 WWC paid Federal Express $200 to have the 200 units of inventory delivered overnight Delivery occurred on 02 06 02 10 Sales of 170 units of inventory occurred during the period of 02 07 02 10 The sales terms are 2 10, net 30 02 15 The 40 units that were paid for in advance and recorded in January are delivered to the customer 02 15 30 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 16 WWC pays the first 2 weeks wages to the employees The total paid is $3,100 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 02 18 Wrote off a customers account in the amount of $1,450 02 19 $4,400 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 expense 02 19 Collected $8,900 of customers Accounts Receivable Of the $8,900, the discount was taken by customers on $5,000 of account balances therefore WWC received less than $8,900 02 26 WWC recovered $490 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 WWC declared and paid a $900 cash dividend Adjusting Entries 02 29 Record the $3,100 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 6 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 months interest earned Kit Kats note (see 02 01) Project 2 Review of Merchandising Cycle ha foliaw ng intermanon aopNes to the questions 1speyed below 19 9 0 nedtrieu Hevenue (40 uritsl 7200 14,300 Allowence for Doubrul Account 30) Nocs Peysibic wNC's none payebla eccrues interest at n 12 nnual rate ww wil use the FiF amoy method end record oes ona peruel b Fooruary Trenceciors 0202 ww 5id S50O1nsurance prcm um cevarrg the month cr February The dmo nt paid is recorded 02, Ssies or T70 units of invertory occurrec curing 172 per oc cr 02027 02 10 The sela, 12mms 52 2 00 nel 30 0215 Tha 4 than war paid for in advenco and racordad in January ane de ierad to the c mr danged rind Cir be e60dG Thef Here they are rec rned ra irsentery 0ANne me esere reiw neo WC recvel less than 02 25 wwc recovered S42Ocash tom the cusormerwe oe ecccumt hed previo sy xen written G22 0210 02 27 A S4 DJ Ln lny bll for Febr erysmsed, t i duo on MMch 5 end infl b paid nen 2 29 Record 53,100 emplopee ss ary thet Is owed brwte psd March

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 26, 2024

Project 2: Review of Merchandising Cycle [The following information applies to the questions displayed below.] Wallys Widget Company (WWC) incorporated near the end of 2011.

Project 2: Review of Merchandising Cycle

[The following information applies to the questions displayed below.]

Wallys 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	$	19,970	Unearned Revenue (40 units)	$	4,800
Accounts Receivable	$	11,000	Accounts Payable (Jan Rent)	$	2,200
Allowance for Doubtful Accounts	$	(1,350)	Notes Payable	$	14,500
Inventory (45 units)	$	3,150	Contributed Capital	$	5,900
			Retained Earnings Feb 1, 2012	$	5,370

	WWC establishes a policy that it will sell inventory at $165 per unit.
	In January, WWC received a $4,800 advance for 40 units, as reflected in Unearned Revenue.
	WWCs February 1 inventory balance consisted of 45 units at a total cost of $3,150.
	WWCs 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 WWCs February 1 Accounts Receivable balance is a $1,500 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 $1,500 balance to a note, and Kit Kat signs a 6-month note, at 10% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012.
02/02	WWC paid a $500 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 200 units of inventory are purchased on account by WWC for $15,000 terms 2/15, n30.
02/05	WWC paid Federal Express $200 to have the 200 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 170 units of inventory occurred during the period of 02/07 02/10. The sales terms are 2/10, net 30.
02/15	The 40 units that were paid for in advance and recorded in January are delivered to the customer.
02/15	30 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.
02/16	WWC pays the first 2 weeks wages to the employees. The total paid is $3,100.
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.
02/18	Wrote off a customers account in the amount of $1,450.
02/19	$4,400 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 expense.
02/19	Collected $8,900 of customers Accounts Receivable. Of the $8,900, the discount was taken by customers on $5,000 of account balances; therefore WWC received less than $8,900.
02/26	WWC recovered $490 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	WWC declared and paid a $900 cash dividend.

Adjusting Entries:

02/29	Record the $3,100 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 6% 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 months interest earned Kit Kats note (see 02/01).

image text in transcribed

Project 2: Review of Merchandising Cycle ! ha foliaw ng intermanon aopNes to the questions 1speyed below 19.9/0 nedtrieu Hevenue (40 uritsl 7200 14,300 Allowence for Doubrul Account 30) Nocs Peysibic wNC's none payebla eccrues interest at n 12% nnual rate ww wil use the FiF amoy method end record oes ona peruel b Fooruary Trenceciors 0202 ww: 5id S50O1nsurance prcm um cevarrg the month cr February. The dmo.nt paid is recorded 02, Ssies or T70 units of invertory occurrec curing 172 per oc cr 02027-02/10. The sela, 12mms 52 2:00 nel 30 0215 Tha 4 than war paid for in advenco and racordad in January ane de ierad to the c mr danged rind Cir be-e60dG Thef Here they are rec.rned ra irsentery 0ANne me esere reiw.neo WC recvel less than 02/25 wwc recovered S42Ocash tom the cusormerwe oe ecccumt hed previo.sy xen written ":G22 0210 02/27 A S4 DJ Ln lny bll for Febr.erysmsed, t i: duo on MMch 5 end "infl b paid nen 2/29 Record 53,100 emplopee ss ary thet Is owed brwte psd March