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 (40 units) Unearned Revenue (35 $19,070 4,500 units) $ 10,100 Accounts Payable (Jan 1,600 Rent) $(1.050) Notes Payable $ 15,000 $3,200 Contributed Capital 5,300 $ Retained Earnings - Feb 1, $ 4,920 2012 WWC establishes a policy that it will sell Inventory at $170 per unit. + In January. WWC received a $4,500 advance for 35 units, as reflected in Unearned Revenue. . WWC's February 1 Inventory balance consisted of 40 units at a total cost of $3,200. 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 $1,800 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow 2/01 problems and cannot pay Its balance at this time. WwC arranges with Kit Kat to convert the $1,800 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 $650 Insurance premium covering the month of February. The amount paid is recorded directly as an expense. 02/05 An additional 140 units of Inventory are purchased on account by WwC for $10,500 - terms 2/15,n30. 2/05 WWC pald Federal Express $420 to have the 140 units of Inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 110 units of Inventory occurred during the period of 02/07 - 02/10. The sales terms are 2/10, net 30. 02/15 The 35 units that were paid for in advance and recorded in January are delivered to the customer 20 units of the Inventory that had been sold on 2/10 are returned to 02/5 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 pald is $2,500. Pald in full the amount owed for the 2/05 purchase of Inventory. WwC 02/17 records 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 $1,150. $3.200 of rent for January and February was paid. Because all of the 02/19 rent will soon expire, the February portion of the payment is charged directly to expense. Collected $8,300 of customers' Accounts Receivable. Of the $8,300, the 02/19 discount was taken by customers on $5,000 of account balances: therefore WwC received less than $8,300. WWC recovered $430 cash from the customer whose account had previously been written off (see 02/18). 2/27A $650 utility bill for February arrived. It is due on March 15 and will be paid then. 02/28WWC declared and paid a $900 cash dividend. adjusting Entries: Record the $2,500 employee salary that is owed but will be paid March WWC decides to use the aging method to estimate uncollectible 02/29accounts. Wwc determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts. 02/29Record February Interest expense accrued on the note payable. 02/26 22:29 Cash Accounts Receivable 10,100 19,070 Beg bal. Feb. 19b Feb. 26b 8,200 650 Feb. 2 Beg. bal. Feb. 10a Feb. 18,700 1,800 Feb. 1 3,400 Feb. 430 430 26a 150 420 Feb. 6 2,500 Feb. 16 10,290 Feb. 17 3,200 Feb. 19a 900 Feb. 28 1,150 Feb. 18 Feb. 8,300 19b Feb. 430 26b End. bal. 9.740 End. bal. 14,150 Beg. bal. Allowance for Doubtful Accounts Beg bal. 1,050 Feb. 18 1,150 430 Feb. 26a 802 Feb. 29b Feb. 5 Inventory 3,200 Feb. 8,660 10,500 10b Feb. 420 2.730 15b 1.560 210 Feb. 17 Feb. 6 Feb. 150 End. bal. 1,132 End. bal. 4,080 Beg bal. Notes Receivable 0 Interest Receivable 0 Beg. bal. Feb. 29d Feb. 1 1,800 15 End. bal. 1,800 End. bal. 151 Accounts Payable Beg. 1,600 bal. Feb. 17 10,500 10,500 Feb, 5 Unearned Revenue 4,500 Beg. bal. Feb. 15a 4,500 Feb. 19a 1,600 650 Feb. 27 End. bal. 650 End. bal. Wages Payable Interest Payable Beg. bal. 0 Beg. bal 0 Feb. 2,500 29a 150 Feb. 29c End. bal. 2,500 End. bal. 150 Beg. bal. Notes Payable 15,000 Beg. bal. Contributed Capital 5,300 End. bal. 15,000 End. bal. 5,300 Beg. bal. CUE 2 CJE 3 Retained Earnings 4,920 18,682 19,715 CJE 1 900 Dividends Declared Beg. bal. 0 Feb. 28 900 900 CJE End. bal 5,053 End. bal. Sales Revenue 0 Beg. bal. CJE 1 Sales Returns & Allowances Beg. 0 bal. Feb. 15d 3,400 3,400|CJE 1 Feb. 23,200 18,700 10a Feb. 4,500 15a End, End. bal. bal. Sales Discounts 0 Cost of Goods Sold 0 Beg. bal. Feb. 19b 100 100CJE 1 Beg. bal. Feb. 10b Feb. 15b 8,660 1,560 Feb. 15c 2,730 9,830 |CJE 2 End. bal. End. bal. Beg Interest Revenue 0 Beg. Bad Debt Expense 0 bal bal. CJE 1 15 15 Feb. 29d Feb. 29b 802 802CJE 2 End. End. bal. bal. Beg. Insurance Expense 0 bal. Feb. 2 Interest Expense Beg. bal. 0 Feb. 290 150 CUE 2 650 650 (CJE 2 150 End. bal. End. bal. Rent Expense Utility Expense 0 Beg. 0 Beg. bal. Feb. bal 1.6001 1.6001CJE 2 IFeb. 27 6501 650 CJE 2 Rent Expense Utility Expense 0 Beg bal. Feb. 19a Beg. bal. Feb. 27 1,600 1,600CJE 2 650 650 CJE 2 End. bal. End. bal. Wages Expense Beg 0 bal. Feb. 29a Feb. 16 5,000|CJE 2 2,500 2,500 1-c. Prepare the financial statements at the end of February (Balance Sheet only, items to be deducted must be indicated with a negative amount.) WWC, Inc. Income Statement Revenues Sales Revenue Less: Sales Returns and Allowances Less: Sales Discounts Net Sales Cost of Goods Sold Gross Profit S 23,200 (3.400) 100) 19,700 9,830 S 9,870 Expenses 650 5.000 802 1,600 650 Insurance Expense Wages Expense Bad Debt Expense Rent Expense Utility Expense Interest Expense Sales Revenue Total Expenses Interest Revenue Net Income 8.852 15 S 1,033 WWC, Inc. Statement of Retained Earnings $ 4.920 Retained Earnings, Beginning of Period Add: Net Income Less: Dividends Retained Earnings, End of Period (900) WWW, Inc. Balance Sheet S 9,740 14,150 $ Liabilities Current Liabilities Accounts Payable Wages Payable Assets Current Assets Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Interest Receivable Notes Receivable 650 2.500 4,080 15 1.800 Total Current Assets $ 29,785 $ Total Current Liabilities Notes Payable 3,150 15,000 18,150 Total liabilities Stockholders' Equity Contributed Capital Retained Earnings 5,300 5,053 10,353 $ 28,503 Total Assets Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ 29,785 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.) @ Credit View transaction list View journal entry worksheet No Transaction General Journal 1 1 Sales Revenue Interest Revenue Sales Returns and Allowances Sales Discounts Retained Earnings Debit 23,200 15 3,400 100 19,715 2 2 18,682 9,830 802 650 Retained Earnings Cost of Goods Sold Bad Debt Expense Insurance Expense Interest Expense Rent Expense Utility Expense Wages Expense 150 1,600 650 5,000 3 3 900 Retained Earnings Dividends Declared 900 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 (40 units) Unearned Revenue (35 $19,070 4,500 units) $ 10,100 Accounts Payable (Jan 1,600 Rent) $(1.050) Notes Payable $ 15,000 $3,200 Contributed Capital 5,300 $ Retained Earnings - Feb 1, $ 4,920 2012 WWC establishes a policy that it will sell Inventory at $170 per unit. + In January. WWC received a $4,500 advance for 35 units, as reflected in Unearned Revenue. . WWC's February 1 Inventory balance consisted of 40 units at a total cost of $3,200. 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 $1,800 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow 2/01 problems and cannot pay Its balance at this time. WwC arranges with Kit Kat to convert the $1,800 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 $650 Insurance premium covering the month of February. The amount paid is recorded directly as an expense. 02/05 An additional 140 units of Inventory are purchased on account by WwC for $10,500 - terms 2/15,n30. 2/05 WWC pald Federal Express $420 to have the 140 units of Inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 110 units of Inventory occurred during the period of 02/07 - 02/10. The sales terms are 2/10, net 30. 02/15 The 35 units that were paid for in advance and recorded in January are delivered to the customer 20 units of the Inventory that had been sold on 2/10 are returned to 02/5 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 pald is $2,500. Pald in full the amount owed for the 2/05 purchase of Inventory. WwC 02/17 records 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 $1,150. $3.200 of rent for January and February was paid. Because all of the 02/19 rent will soon expire, the February portion of the payment is charged directly to expense. Collected $8,300 of customers' Accounts Receivable. Of the $8,300, the 02/19 discount was taken by customers on $5,000 of account balances: therefore WwC received less than $8,300. WWC recovered $430 cash from the customer whose account had previously been written off (see 02/18). 2/27A $650 utility bill for February arrived. It is due on March 15 and will be paid then. 02/28WWC declared and paid a $900 cash dividend. adjusting Entries: Record the $2,500 employee salary that is owed but will be paid March WWC decides to use the aging method to estimate uncollectible 02/29accounts. Wwc determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts. 02/29Record February Interest expense accrued on the note payable. 02/26 22:29 Cash Accounts Receivable 10,100 19,070 Beg bal. Feb. 19b Feb. 26b 8,200 650 Feb. 2 Beg. bal. Feb. 10a Feb. 18,700 1,800 Feb. 1 3,400 Feb. 430 430 26a 150 420 Feb. 6 2,500 Feb. 16 10,290 Feb. 17 3,200 Feb. 19a 900 Feb. 28 1,150 Feb. 18 Feb. 8,300 19b Feb. 430 26b End. bal. 9.740 End. bal. 14,150 Beg. bal. Allowance for Doubtful Accounts Beg bal. 1,050 Feb. 18 1,150 430 Feb. 26a 802 Feb. 29b Feb. 5 Inventory 3,200 Feb. 8,660 10,500 10b Feb. 420 2.730 15b 1.560 210 Feb. 17 Feb. 6 Feb. 150 End. bal. 1,132 End. bal. 4,080 Beg bal. Notes Receivable 0 Interest Receivable 0 Beg. bal. Feb. 29d Feb. 1 1,800 15 End. bal. 1,800 End. bal. 151 Accounts Payable Beg. 1,600 bal. Feb. 17 10,500 10,500 Feb, 5 Unearned Revenue 4,500 Beg. bal. Feb. 15a 4,500 Feb. 19a 1,600 650 Feb. 27 End. bal. 650 End. bal. Wages Payable Interest Payable Beg. bal. 0 Beg. bal 0 Feb. 2,500 29a 150 Feb. 29c End. bal. 2,500 End. bal. 150 Beg. bal. Notes Payable 15,000 Beg. bal. Contributed Capital 5,300 End. bal. 15,000 End. bal. 5,300 Beg. bal. CUE 2 CJE 3 Retained Earnings 4,920 18,682 19,715 CJE 1 900 Dividends Declared Beg. bal. 0 Feb. 28 900 900 CJE End. bal 5,053 End. bal. Sales Revenue 0 Beg. bal. CJE 1 Sales Returns & Allowances Beg. 0 bal. Feb. 15d 3,400 3,400|CJE 1 Feb. 23,200 18,700 10a Feb. 4,500 15a End, End. bal. bal. Sales Discounts 0 Cost of Goods Sold 0 Beg. bal. Feb. 19b 100 100CJE 1 Beg. bal. Feb. 10b Feb. 15b 8,660 1,560 Feb. 15c 2,730 9,830 |CJE 2 End. bal. End. bal. Beg Interest Revenue 0 Beg. Bad Debt Expense 0 bal bal. CJE 1 15 15 Feb. 29d Feb. 29b 802 802CJE 2 End. End. bal. bal. Beg. Insurance Expense 0 bal. Feb. 2 Interest Expense Beg. bal. 0 Feb. 290 150 CUE 2 650 650 (CJE 2 150 End. bal. End. bal. Rent Expense Utility Expense 0 Beg. 0 Beg. bal. Feb. bal 1.6001 1.6001CJE 2 IFeb. 27 6501 650 CJE 2 Rent Expense Utility Expense 0 Beg bal. Feb. 19a Beg. bal. Feb. 27 1,600 1,600CJE 2 650 650 CJE 2 End. bal. End. bal. Wages Expense Beg 0 bal. Feb. 29a Feb. 16 5,000|CJE 2 2,500 2,500 1-c. Prepare the financial statements at the end of February (Balance Sheet only, items to be deducted must be indicated with a negative amount.) WWC, Inc. Income Statement Revenues Sales Revenue Less: Sales Returns and Allowances Less: Sales Discounts Net Sales Cost of Goods Sold Gross Profit S 23,200 (3.400) 100) 19,700 9,830 S 9,870 Expenses 650 5.000 802 1,600 650 Insurance Expense Wages Expense Bad Debt Expense Rent Expense Utility Expense Interest Expense Sales Revenue Total Expenses Interest Revenue Net Income 8.852 15 S 1,033 WWC, Inc. Statement of Retained Earnings $ 4.920 Retained Earnings, Beginning of Period Add: Net Income Less: Dividends Retained Earnings, End of Period (900) WWW, Inc. Balance Sheet S 9,740 14,150 $ Liabilities Current Liabilities Accounts Payable Wages Payable Assets Current Assets Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Interest Receivable Notes Receivable 650 2.500 4,080 15 1.800 Total Current Assets $ 29,785 $ Total Current Liabilities Notes Payable 3,150 15,000 18,150 Total liabilities Stockholders' Equity Contributed Capital Retained Earnings 5,300 5,053 10,353 $ 28,503 Total Assets Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ 29,785 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.) @ Credit View transaction list View journal entry worksheet No Transaction General Journal 1 1 Sales Revenue Interest Revenue Sales Returns and Allowances Sales Discounts Retained Earnings Debit 23,200 15 3,400 100 19,715 2 2 18,682 9,830 802 650 Retained Earnings Cost of Goods Sold Bad Debt Expense Insurance Expense Interest Expense Rent Expense Utility Expense Wages Expense 150 1,600 650 5,000 3 3 900 Retained Earnings Dividends Declared 900