Required information (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 Inventory (45 units) $ 15,500 $19,220 Unearned Revenue (40 units) $ 4,550 $10,250 Accounts Payable (Jan Rent) $1,700 $ (1,100) Notes Payable $ 3,600 Contributed Capital $ 5,400 Retained Earnings - Feb 1, $ 4,820 2012 WWC establishes a policy that it will sell inventory at $175 per unit. In January, WWC received a $4,550 advance for 40 units, as reflected in Unearned Revenue. WWC's February 1 inventory balance consisted of 45 units at a total cost of $3,600. 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 Included in WWC's February 1 Accounts Receivable balance is a $1,900 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and 02/01 cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,900 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 $700 insurance premium covering the month of February. The amount paid is recorded directly as an expense. 02/05 An additional 150 units of inventory are purchased on account by WwC for $9,000 - terms 2/15, n30. 02/05 WWc paid Federal Express $600 to have the 150 units of inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 120 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. 25 units of the inventory that had been sold on 2/10 are returned to WWC. The 02/15 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 $2,600. Paid in full the amount owed for the 2/05 purchase of inventory. WWC records 02/17 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 $1,200. 02/19 $3,400 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. Collected $8,400 of customers' Accounts Receivable. Of the $8,400, the 02/19 discount was taken by customers on $5,500 of account balances; therefore WWC received less than $8,400. 02/26 WWC recovered $440 cash from the customer whose account had previously been written off (see 02/18). 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 $400 cash dividend. Adjusting Entries: 02/29 Record the $2,600 employee salary that is owed but will be paid March 1. WWC decides to use the aging method to estimate uncollectible accounts. WWC 02/29 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). WWW, Inc. Balance Sheet Assets Liabilities Current Assets Current Liabilities Total Current Assets Total Current Liabilities Total liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity Total Assets 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 Journal entry worksheet Record the entry to close sales revenue, interest revenue, sales returns and allowances, sales discounts. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Record entry Clear entry View general Journal 2. Prepare all February 29 closing entries for WWC. Post to the T-Accounts in requirement 1-5. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the entry to close expenses. Note: Enter debits before credits. Transaction General Journal Debit Credit 2 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 Journal entry worksheet Record the entry to close dividends. Note: Enter debits before credits. Transaction General Journal Debit Credit 3 Record entry Clear entry View general journal