| WWC establishes a policy that it will sell inventory at $170 per unit. | | In January, WWC received a $4,850 advance for 25 units, as reflected in Unearned Revenue. | | WWCs February 1 inventory balance consisted of 30 units at a total cost of $2,700. | | 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 $1,400 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 $1,400 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 $550 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. | 02/05 | WWC paid 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 25 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 $3,200. | 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 $1,500. | 02/19 | $4,600 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 $9,000 of customers Accounts Receivable. Of the $9,000, the discount was taken by customers on $5,500 of account balances; therefore WWC received less than $9,000. | 02/26 | WWC recovered $500 cash from the customer whose account had previously been written off (see 02/18). | 02/27 | A $450 utility bill for February arrived. It is due on March 15 and will be paid then. | 02/28 | WWC declared and paid a $450 cash dividend. | 02/29 | Record the $3,200 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 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 months interest earned Kit Kats note (see 02/01). | Required: Prepare 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.) Prepare the financial statements at the end of February. (Balance Sheet only, items to be deducted must be indicated with a negative amount.) |