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 5,350 $21,620 Unearned Revenue (30 units) $ 3,300 $ Accounts Receivable $12,650 Accounts Payable (Jan Rent) Allowance for Doubtful Accounts 16,000 $1,900) Notes Payable $ Inventory (35 units) 7,000 S $2,800 Contributed Capital Retained Earnings- Feb 1 2012 3,520 $ wWC establishes a policy that it will sell inventory at $180 per unit. In January, WWC received a $5,350 advance for 30 units, as refilected in Unearned Revenue. wwC's February 1 inventory balance consisted of 35 units at a total cost of $2,800. 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 $1,400 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 02/01 interest. The principal and all interest will be due and payable to WWC on August 1, 2012 wwc paid a $650 insurance premium covering the month of February. The 02/02 amount paid is recorded directly as an expense. An additional 180 units of inventory are purchased on account by WWC for 02/05) $13,500-terms 2/15, n30 wWC paid Federal Express $360 to have the 180 units of inventory delivered 02/05 overnight. Delivery occurred on 02/06. Sales of 150 units of inventory occurred during the period of 02/07-02/10. The 02/10 sales terms are 2/10, net 30. The 30 units that were paid for in advance and recorded in January are delivered to the customer 02/15 25 units of the inventory that had been sold on 2/10 are returned to WWC. The 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 wWC paid a $650 insurance premium covering the month of February. The amount paid is recorded directly as an expense. An additional 180 units of inventory are purchased on account by WWC for $13.500-terms 2/15, n30 wWC paid Federal Express $360 to have the 180 units of inventory delivered 02/01 02/02 02/05 02/05 overnight. Delivery occurred on 02/06. Sales of 150 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 30 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 $2.800. 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 $2,000 $6,600 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. Collected $10,000 of customers' Accounts Recevable Of the $10,000, the 02/19 02/19 discount was taken by customers on $8,000 of account balances; therefore wWC received less than $10,000 wwC recovered $600 cash from the customer whose account had previously 02/26 been written off (see 02/18) 02/27 A $950 utility bill for February arived, It is due on March 15 and will be paid then 02/28 WWC declared and paid a $950 cash dividend. Adjusting Entries 02/29 Record the $2,800 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) 1-b. Post all February entries (transactions and adjustments) to the T-accounts Cash Accounts Receivable Beg bal Beg bal End bal End bal Allowance for Doubtful Accounts Inventory Beg bal Beg bal End bal End bal Notes Receivable Interest Receivable Beg ba Beg bal End bal End bal Unearned Revenue Accounts Payable Beg bal Beg bal 1 of 1 Prov Next 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 Dividends Declared Retained Earnings Beg bal Beg bal End bal End bal. Sales Returns & Allowances Sales Revenue Beg bal Beg bal Next Prev 1 of 1 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. Bad Debt Expense Interest Revenue Beg bal. Beg bal. End. bal. End. bal Interest Expense Insurance Expense Beg bal Beg bal End bal End. bal. ieitit Prev 1 of 1 Kevelnue DOu Leut CApes Beg bal Beg bal. End. bal End. bal. Insurance Expense Interest Expense Beg ball Beg bal End. bal. End. bal Rent Expense Utility Expense Beg bal. Beg bal End bal End bal. Wages Expense Beg bal