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: 4,500 $1,600 $15,000 5,300 Retained Earnings - Feb 1, 2012 4,920 $ 19,070 $10,100 Unearned Revenue (35 units) Accounts Payable (Jan Rent) Cash Accounts Receivable Allowance for Doubtful Accounts $(1050) Notes Payable Inventory (40 units) $3,200 Contributed Capital . WWC establishes a policy that it will sell inventory at $170 per unit In January, WWC recelved 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 e $1,800 account due from Kit Kat, a WWC customer. Kilt Kat is having cash flow 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 02/01 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 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. ono sales of 110 units of inventory occurred during the period of 02/07-02/0. The sales terms are 2/10, net 30. 0215 The 35 units that were paid for in advance and recorded in January are delivered to the customer. 02/15 20 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 $2,500. 02/17 Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in e current period rather than as a reduction of inventory costs. 02/18 Wrote off a customer's account in the amount of $1150. 02/19 $3,200 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 $8,300 of customers' Accounts Recelvable. Of the $8,300, the discount was taken by 02/19 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 wc 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. occurred on 02/06. net 30 02/05 WWC paid Federal Express $420 to have the 140 units of inventory delivered overnight. Delivery 0210 Sales of 110 units of inventory occurred during the period of 02/07-02/10. The sales terms are 2/10, 02/15 The 35 units that were paid for in advance and recorded in January are delivered to the customer. 02/15 20 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. 0216 wwc pays the first 2 weeks wages to the employees. The total paid is $2,500. 02/17 Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in 02/18 Wrote off a customer's account in the amount of $1,150 e current period rather than as a reduction of inventory costs. 02/19 $3,200 of re nt 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. customers on $5,000 of account balances; therefore WWC received less than $8.300. 02/18). 02/19 Collected $8,300 02/26 wWC recovered $430 cash from the customer whose account had previously been written off (see 02/27 A $650 utility bill for February arrived. It is due on March 15 and will be paid then 02/28 wVc declared and paid a $900 cash dividend. Adjusting Entries: of customers' Accounts Receivable. Of the $8,300, the discount was taken by 02/29 Record the $2,500 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 month's interest earned Kit Kat's note (see 02/01). 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 For the Month Ended February 29 Revenues Sales Revenue Less: Sales Discounts Less: Sales Returns and Allowances Net Sales Cost of Goods Sold Gross Profit xpenses Bad Debt Expense Insurance Expense Wages Expense Rent Expense Utility Expense Interest Expense Total Expenses Interest Revenue Net Income 0