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$19,220Unearned Revenue (40 units)$4,550Accounts Receivable$10,250Accounts Payable (Jan Rent)$1,700Allowance for Doubtful Accounts$(1,100)Notes Payable$15,500Inventory (45 units)$3,600Contributed Capital$5,400Retained Earnings - Feb 1, 2012$4,820

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 Transactions02/01Included 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 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.

02/02WWC paid a $700 insurance premium covering the month of February.The amount paid is recorded directly as an expense.

02/05An additional 150 units of inventory are purchased on account by WWC for $9,000 - terms 2/15, n30.

02/05WWC paid Federal Express $600 to have the 150 units of inventory delivered overnight.Delivery occurred on 02/06.

02/10Sales of 120 units of inventory occurred during the period of 02/07 - 02/10. The sales terms are 2/10, net 30.

02/15The 40 units that were paid for in advance and recorded in January are delivered to the customer.

02/1525 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.

02/16WWC pays the first 2 weeks wages to the employees. The total paid is $2,600.02/17Paid 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.

02/18Wrote 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.

02/19Collected $8,400 of customers' Accounts Receivable. Of the $8,400, the discount was taken by customers on $5,500 of account balances; therefore WWC received less than $8,400.

02/26WWC recovered $440 cash from the customer whose account had previously been written off (see 02/18).

02/27A $700 utility bill for February arrived.It is due on March 15 and will be paid then.

02/28WWC declared and paid a $400 cash dividend.

Adjusting Entries:02/29Record the $2,600 employee salary that is owed but will be paid March 1.

02/29WWC decides to use the aging method to estimate uncollectible accounts.WWC determines 8% of the endingbalance is the appropriate end of February estimate of uncollectible accounts.

02/29Record February interest expense accrued on the note payable.02/29Record one month's interest earned Kit Kat's note (see 02/01).

Required:1-a. create all February journal entries and adjusting entries.(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1-b.Post all February entries (transactions and adjustments) to the T-accounts.

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.)

2.

create 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.)