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	$	19,370		Unearned Revenue (45 units)	$	4,600
Accounts Receivable	$	10,400		Accounts Payable (Jan Rent)	$	1,800
Allowance for Doubtful Accounts	$	(1,150)		Notes Payable	$	16,000
Inventory (50 units)	$	4,000		Contributed Capital	$	5,500
				Retained Earnings Feb 1, 2012	$	4,720

	WWC establishes a policy that it will sell inventory at $180 per unit.
	In January, WWC received a $4,600 advance for 45 units, as reflected in Unearned Revenue.
	WWCs February 1 inventory balance consisted of 50 units at a total cost of $4,000.
	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 $2,000 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 $2,000 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 $750 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 160 units of inventory are purchased on account by WWC for $12,000 terms 2/15, n30.
02/05	WWC paid Federal Express $320 to have the 160 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 130 units of inventory occurred during the period of 02/07 02/10. The sales terms are 2/10, net 30.
02/15	The 45 units that were paid for in advance and recorded in January are delivered to the customer.
02/15	10 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 $2,700.
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 $1,250.
02/19	$3,600 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 expense.
02/19	Collected $8,500 of customers Accounts Receivable. Of the $8,500, the discount was taken by customers on $6,000 of account balances; therefore WWC received less than $8,500.
02/26	WWC recovered $450 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $750 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $500 cash dividend.

Adjusting Entries:

02/29	Record the $2,700 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).

Answer is complete but not entirely correct. General Journal Credit Feb 1 Notes Receivable 2,000 Accounts Receivable 2,000 Fsb. 2 Insurance Expense 750 Cash Feb. 5 12.000 Accounts Payable 12,000 Feb. 6 Cash 320 Feb. 10a Accounts Receivable 23,400 Sales Revenue 23,400 Feb. 106 Cost of Goods Sold 10,160 10,160 Feb. 15a 4,600 Uneamed Revenue Sales Revenue ,600 Feb. 15b Cost of Goods Sold 3465 ,465 Feb. 15c Cost of Goods Sold Feb. 15d Sales Returns and Alowance 1,800 1800 Feb. 16 Wages Expense 2,700 Cash 2,700 12 Feb. 17 Accounts Payable 120000 240 11,760 Cash Feb. 18 Allowance for Doubttul Accounts 1250 Accounts Receivalble 250 Feb. 19a Rent Expense Accounts Payable 1,800 1,800 14 Cash 3,600 15 Feb. 19b Cash 8,380 Sales Discounts Accounts Receivable ,500 16 Feb. 26a Accounts Receivable Allowance for Doubtul Accounts Feb. 26b Accounts Receivable 450 Feb 27 Utiity Expense 750 G Accounts Payable 19 Feb. 20 Dividends Declared Cash 20 Feb. 29a Wages Expense 2.700 Wages Payable 2,700 Feb. 29b Bad Debt Expense 1,215 Allowance for Doubtful Accounts ,215 03 Feb. 29c Interest Expense Interest Payable 160 Feb. 290 Interest Receivable Interest Revenue 160 2. Prepare all February 29 closing entries for WWC. Post to the T-Accounts in requirement 1-b. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Import a new list 1 Record the entry to close sales revenue, interest revenue, sales returns and allowances, sales discounts. Record the entry to close expenses. Record the entry to close dividends. ns and 2 3 Credit Note:journal entry has been entered Record entry Clear entry View general journal