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: 4,800 Cash $19,970 Unearned Revenue (40 units) Accounts Receivable Allowance for Doubtful Accounts $ 2,200 $11,000 Accounts Payable (Jan Rent) $ 14,500 $(1,350) Notes Payable $ 3,150 Contributed Capital 5,900 Retained Earnings Feb 1, 5,370 2012 Inventory (45 units) . 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. WWC's February 1 inventory balance consisted of 45 units at a total cost of $3,150. 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 $1,500 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 $1,500 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. WWC paid a $500 insurance premium covering the month of February. The 02/02 amount paid is recorded directly as an expense. An additional 200 units of inventory are purchased on account by WwC for 02/05 $15,000 - terms 2/15, n30. WWC paid Federal Express $200 to have the 200 units of inventory delivered 02/05 overnight. Delivery occurred on 02/06. Sales of 170 units of inventory occurred during the period of 02/07 - 02/10. The 02/10 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. 30 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 $3,100. 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 $1,450. $4,400 of rent for January and February was paid. Because all of the rent will 02/19 soon expire, the February portion of the payment is charged directly to expense. Collected $8,900 of customers' Accounts Receivable. Of the $8,900, the 02/19 discount was taken by customers on $5,000 of account balances; therefore WWC received less than $8,900. WWC recovered $490 cash from the customer whose account had previously 02/26 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. WWC decides to use the aging method to estimate uncollectible accounts. WWC 02/29 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 month's interest earned Kit Kat's note (see 02/01). Cash Accounts Receivable Beg. bal. Beg. bal. End. bal. End. bal. 0 Inventory Allowance for Doubtful Accounts Beg. bal. Beg. bal. End. bal. End. bal. Notes Receivable Interest Receivable Beg. bal. Beg. bal. End. bal. End. bal. Accounts Payable Unearned Revenue Beg. bal. Beg. bal. End. bal. End. bal. Wages Payable Interest Payable Beg. bal. Beg. bal. End. bal. End. bal. Notes Payable Contributed Capital Beg. bal. Beg. bal. End. bal. End. bal. Retained Earnings Dividends Declared Beg. bal. Beg. bal. End. bal. End. bal. Sales Revenue Sales Returns & Allowances Beg. bal. Beg. bal. End. bal. End. bal. Sales Discounts Cost of Goods Sold Beg. bal. Beg. bal. End. bal. End. bal. Interest Revenue Bad Debt Expense Beg. bal. Beg. bal. End. bal. End. bal. Insurance Expense Interest Expense Beg. bal. Beg. bal. End. bal. End, bal. Rent Expense Utility Expense Beg. bal. Beg. bal. End. bal. End. bal. Wages Expense Beg. bal. WWC, Inc. Income Statement For the Month Ended February 29 Revenues Sales Revenue Less: Sales Returns and Allowances Less: Sales Discounts Net Sales 0 Cost of Goods Sold Gross Profit $ 0 Expenses Insurance Expense Wages Expense Rent Expense Utility Expense Bad Debt Expense Interest Expense Total Expenses 0 Net Income $ 0 WWC, Inc. Statement of Retained Earnings Retained Earnings, Beginning of Period Add: Net Income Less: Dividends Retained Earnings, End of Period WWW, Inc. Balance Sheet Assets Liabilities Current Assets Current Liabilities Cash Accounts Payable Interest Payable Inventory Accounts Receivable Wages Payable Notes Receivable Interest Receivable Total Current Assets $ 0 Total Current Liabilities $ 0 Notes Payable Total liabilities 0 Stockholders' Equity Contributed Capital Retained Earnings Total Stockholders' Equity 0 Total Assets $ 0 Total Liabilities and Stockholders' Equity $ 0 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 X 1 Record the entry to close sales revenue , interest revenue, sales returns and allowances, sales discounts. 'ns and 2 Record the entry to close expenses. 3 Record the entry to close dividends. Credit Note : = journal entry has been entered Record entry Clear entry View general journal 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: 4,800 Cash $19,970 Unearned Revenue (40 units) Accounts Receivable Allowance for Doubtful Accounts $ 2,200 $11,000 Accounts Payable (Jan Rent) $ 14,500 $(1,350) Notes Payable $ 3,150 Contributed Capital 5,900 Retained Earnings Feb 1, 5,370 2012 Inventory (45 units) . 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. WWC's February 1 inventory balance consisted of 45 units at a total cost of $3,150. 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 $1,500 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 $1,500 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. WWC paid a $500 insurance premium covering the month of February. The 02/02 amount paid is recorded directly as an expense. An additional 200 units of inventory are purchased on account by WwC for 02/05 $15,000 - terms 2/15, n30. WWC paid Federal Express $200 to have the 200 units of inventory delivered 02/05 overnight. Delivery occurred on 02/06. Sales of 170 units of inventory occurred during the period of 02/07 - 02/10. The 02/10 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. 30 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 $3,100. 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 $1,450. $4,400 of rent for January and February was paid. Because all of the rent will 02/19 soon expire, the February portion of the payment is charged directly to expense. Collected $8,900 of customers' Accounts Receivable. Of the $8,900, the 02/19 discount was taken by customers on $5,000 of account balances; therefore WWC received less than $8,900. WWC recovered $490 cash from the customer whose account had previously 02/26 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. WWC decides to use the aging method to estimate uncollectible accounts. WWC 02/29 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 month's interest earned Kit Kat's note (see 02/01). Cash Accounts Receivable Beg. bal. Beg. bal. End. bal. End. bal. 0 Inventory Allowance for Doubtful Accounts Beg. bal. Beg. bal. End. bal. End. bal. Notes Receivable Interest Receivable Beg. bal. Beg. bal. End. bal. End. bal. Accounts Payable Unearned Revenue Beg. bal. Beg. bal. End. bal. End. bal. Wages Payable Interest Payable Beg. bal. Beg. bal. End. bal. End. bal. Notes Payable Contributed Capital Beg. bal. Beg. bal. End. bal. End. bal. Retained Earnings Dividends Declared Beg. bal. Beg. bal. End. bal. End. bal. Sales Revenue Sales Returns & Allowances Beg. bal. Beg. bal. End. bal. End. bal. Sales Discounts Cost of Goods Sold Beg. bal. Beg. bal. End. bal. End. bal. Interest Revenue Bad Debt Expense Beg. bal. Beg. bal. End. bal. End. bal. Insurance Expense Interest Expense Beg. bal. Beg. bal. End. bal. End, bal. Rent Expense Utility Expense Beg. bal. Beg. bal. End. bal. End. bal. Wages Expense Beg. bal. WWC, Inc. Income Statement For the Month Ended February 29 Revenues Sales Revenue Less: Sales Returns and Allowances Less: Sales Discounts Net Sales 0 Cost of Goods Sold Gross Profit $ 0 Expenses Insurance Expense Wages Expense Rent Expense Utility Expense Bad Debt Expense Interest Expense Total Expenses 0 Net Income $ 0 WWC, Inc. Statement of Retained Earnings Retained Earnings, Beginning of Period Add: Net Income Less: Dividends Retained Earnings, End of Period WWW, Inc. Balance Sheet Assets Liabilities Current Assets Current Liabilities Cash Accounts Payable Interest Payable Inventory Accounts Receivable Wages Payable Notes Receivable Interest Receivable Total Current Assets $ 0 Total Current Liabilities $ 0 Notes Payable Total liabilities 0 Stockholders' Equity Contributed Capital Retained Earnings Total Stockholders' Equity 0 Total Assets $ 0 Total Liabilities and Stockholders' Equity $ 0 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 X 1 Record the entry to close sales revenue , interest revenue, sales returns and allowances, sales discounts. 'ns and 2 Record the entry to close expenses. 3 Record the entry to close dividends. Credit Note : = journal entry has been entered Record entry Clear entry View general journal