Wallys 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 $ 18,920 Unearned Revenue (30 units) $ 4,450 Accounts Receivable $ 9,950 Accounts Payable (Jan Rent) $ 1,500 Allowance for Doubtful Accounts $ (1,000) Notes Payable $ 14,500 Inventory (35 units) $ 2,800 Contributed Capital $ 5,200 Retained Earnings Feb 1, 2012 $ 5,020 WWC establishes a policy that it will sell inventory at $165 per unit In January, WWC received a $4,450 advance for 30 units, as reflected in Unearned Revenue WWCs February 1 inventory balance consisted of 35 units at a total cost of $2,800 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 $1,700 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 $1,700 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 $600 insurance premium covering the month of February The amount paid is recorded directly as an expense 02 05 An additional 130 units of inventory are purchased on account by WWC for $9,750 terms 2 15, n30 02 05 WWC paid Federal Express $260 to have the 130 units of inventory delivered overnight Delivery occurred on 02 06 02 10 Sales of 100 units of inventory occurred during the period of 02 07 02 10 The 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 02 15 15 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 $2,400 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 $1,100 02 19 $3,000 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 $8,200 of customers Accounts Receivable Of the $8,200, the discount was taken by customers on $4,500 of account balances therefore WWC received less than $8,200 02 26 WWC recovered $420 cash from the customer whose account had previously been written off (see 02 18) 02 27 A $600 utility bill for February arrived It is due on March 15 and will be paid then 02 28 WWC declared and paid a $800 cash dividend Adjusting Entries 02 29 Record the $2,400 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 1 a 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 ) 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 ) No Date General Journal Debit Credit 1 Feb 1 Accounts Payable 1700 Accounts Receivable 1700 2 Feb 2 Insurance Expense 600 Cash 600 3 Feb 5 Inventory 9750 Accounts Payable 9750 4 Feb 6 Inventory 260 Cash 5 Feb 10a Accounts Receivable 16500 Sales Revenue (165 100) 16500 6 Feb 10b Cost of Goods Sold (35 80) (65 77) 7805 Inventory 7805 Feb 15a Unearned Revenue 4450 Sales Revenue 4450 8 Feb 15b Cost of Goods Sold (30 77) 2310 Inventory 2310 9 Feb 15c Inventory (15 77) 1155 Cost of Goods sold 1155 10 Feb 15d Sales Returns and Allowance 2475 Accounts Receivable (15 165) 2475 11 Feb 16 Wages Expense 2400 Cash 2400 12 Feb 17 Accounts Payable 9750 Cash 9555 Inventory (9750 2 ) 195 Feb 18 Allowance for Doubtful Accounts 1100 Accounts Receivable 1100 14 Feb 19a Accounts Payable 1500 Rent Expense 1500 Cash 3000 15 Feb 19b Cash 8110 Sales Discounts (4500 2 ) 90 Accounts Receivable 8200 16 Feb 26a Accounts Receivable Allowance for Doubtful Accounts 420 17 Feb 26b Cash 420 Accounts Receivable 420 18 Feb 27 Utility Expense Accounts Payable 600 19 Feb 28 Dividends Declared 800 Cash 800 20 Feb 29a Wages Expense 2400 Accounts Payable 2400 21 Feb 29b Bad Debt Expense Allowance or Doubtful Accounts 718 22 Feb 29c Interest Expense (14500 12 1 12) 145 Interest Payable 145 23 Feb 29d Interest Receivable (1700 12 1 12) 17 Interest Revenue 1 b Post all February entries (transactions and adjustments) to the T accounts Cash Accounts Receivable Beg Bal $ 18,920 Beg Bal $ 9,950 Feb 19b $ 8,110 $ 600 Feb 02 Feb 10a $ 16,500 $1,700 Feb 01 Feb 26b $ 420 $ 260 Feb 06 Feb 26a $ 420 $2,475 Feb 15d $ 2,400 Feb 16 $ 1,100 Feb 18 $ 9,555 Feb 17 $ 8,200 Feb 196 $ 3,000 Feb 19a $ 420 Feb 26b $ 800 Feb 28 End Bal $ 10,835 End Bal $ 12,975 Allowance for Doubtful Accounts Beg Bal $1,000 $ 420 Inventory Beg Bal $ 2,800 Feb 05 $ 9,750 $ 7,805 Feb 06 $ 260 $ 2,310 Feb 18 $ 1,100 Feb 26a Feb 10b $ 718 Feb 29b Feb 15b Feb 150 $ 1,155 $ 195 Feb 17 End Bal $ 1,038 End Bal $ 3,655 Notes Receivable Interest Receivable Beg Bal Beg Bal Feb 29d $17 End Bal End Bal $ 17 Accounts Payable Unearned Revenue Beg Bal $1,500 Beg Bal $ 4,450 Feb 01 Feb 05 Feb 15a $ 4,450 Feb 17 $ 1,700 $ 9,750 $ 1,500 $ 9,750 $ 600 $ 2,400 Feb 27 Feb 19a Feb 29a End Bal $ 1,300 End Bal $o Wages Payable Interest Payable Beg Bal Beg Bal $ 145 Feb 29c End Bal End Bal $ 145 Notes Payable Contributed Capiatal Beg Bal $ 14,500 Beg Bal $ 5,200 End Bal $ 14,500 End Bal $5,200 Dividends Declared Retained Earnings $ 5,020 Beg Bal Beg Bal Feb 28 $ 800 End Bal $ 5,020 End Bal $ 800 Sales Revenue Sales Return Allowance Beg Bal Beg Bal $ 16,500 Feb 10a Feb 15d $2,475 $4,450 Feb 15a End Bal $ 20,950 End Bal $ 2,475 Sales Discounts Cost of goods sold Beg Bal Beg Bal Feb 19b $90 Feb 10b $ 7,805 $ 1,155 Feb 15c Feb 156 $2,310 End Bal $ 90 End Bal $ 8,960 Interest Revenue Bad Debt Expense Beg Bal Beg Bal Feb 29d Feb 29b $ 718 End Bal End Bal $ 718 Insurance Expense Interest Expense Beg Bal Beg Bal Feb 02 $ 600 Feb 29 $ 145 End Bal $ 600 End Bal $ 145 Rent Expense Utility Expense Beg Bal Beg Bal Feb 19a $1,500 Feb 27 $ 600 End Bal $1,500 End Bal $ 600 Wages Expense Beg Bal Feb 16 $ 2,400 Feb 29a $2,400 End Bal $4,800 WWC, Inc Income Statement

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 07, 2024

Wallys Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the

Wallys 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	$	18,920	Unearned Revenue (30 units)	$	4,450
Accounts Receivable	$	9,950	Accounts Payable (Jan Rent)	$	1,500
Allowance for Doubtful Accounts	$	(1,000)	Notes Payable	$	14,500
Inventory (35 units)	$	2,800	Contributed Capital	$	5,200
			Retained Earnings Feb 1, 2012	$	5,020

	WWC establishes a policy that it will sell inventory at $165 per unit.
	In January, WWC received a $4,450 advance for 30 units, as reflected in Unearned Revenue.
	WWCs February 1 inventory balance consisted of 35 units at a total cost of $2,800.
	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 $1,700 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 $1,700 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 $600 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 130 units of inventory are purchased on account by WWC for $9,750 terms 2/15, n30.
02/05	WWC paid Federal Express $260 to have the 130 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 100 units of inventory occurred during the period of 02/07 02/10. The 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.
02/15	15 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 $2,400.
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 $1,100.
02/19	$3,000 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 $8,200 of customers Accounts Receivable. Of the $8,200, the discount was taken by customers on $4,500 of account balances; therefore WWC received less than $8,200.
02/26	WWC recovered $420 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $600 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $800 cash dividend.

Adjusting Entries:

02/29	Record the $2,400 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:

1-a.

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.)

image text in transcribed

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.)

image text in transcribed

No. Date General Journal Debit Credit 1 Feb. 1 Accounts Payable 1700 Accounts Receivable 1700 2 Feb. 2 Insurance Expense 600 Cash 600 3 Feb. 5 Inventory 9750 Accounts Payable 9750 4 Feb. 6 Inventory 260 Cash 5 Feb. 10a Accounts Receivable 16500 Sales Revenue (165 * 100) 16500 6 Feb. 10b Cost of Goods Sold * [(35 * 80) + (65 * 77)] | 7805 Inventory 7805 Feb. 15a Unearned Revenue 4450 Sales Revenue 4450 8 Feb 15b Cost of Goods Sold (30 * 77) 2310 Inventory 2310 9 Feb 15c Inventory (15* 77) 1155 Cost of Goods sold 1155 10 Feb 15d Sales Returns and Allowance 2475 Accounts Receivable (15 * 165) 2475 11 Feb. 16 Wages Expense 2400 Cash 2400 12 Feb-17 Accounts Payable 9750 Cash 9555 Inventory (9750 * 2%) 195 Feb-18 Allowance for Doubtful Accounts 1100 Accounts Receivable 1100 14 Feb 19a Accounts Payable 1500 Rent Expense 1500 Cash 3000 15 Feb. 19b Cash 8110 Sales Discounts (4500 * 2%) 90 Accounts Receivable 8200 16 Feb. 26a Accounts Receivable Allowance for Doubtful Accounts 420 17 Feb. 26b Cash 420 Accounts Receivable 420 18 Feb. 27 Utility Expense Accounts Payable 600 19 Feb. 28 Dividends Declared 800 Cash 800 20 Feb. 29a Wages Expense 2400 Accounts Payable 2400 21 Feb. 29b Bad Debt Expense ** Allowance or Doubtful Accounts 718 22 Feb. 29c Interest Expense (14500 * 12% * 1/12) 145 Interest Payable 145 23 Feb. 29d Interest Receivable (1700 * 12% * 1/12) 17 Interest Revenue 1-b. Post all February entries (transactions and adjustments) to the T-accounts. Cash Accounts Receivable Beg.Bal. $ 18,920 Beg.Bal. $ 9,950 Feb.19b $ 8,110 $ 600 Feb-02 Feb.10a $ 16,500 $1,700 Feb-01 Feb.26b $ 420 $ 260 Feb-06 Feb.26a $ 420 $2,475 Feb.15d $ 2,400 Feb.16 $ 1,100 Feb-18 $ 9,555 Feb-17 $ 8,200 Feb.196 $ 3,000 Feb.19a $ 420 Feb.26b $ 800 Feb-28 End.Bal. $ 10,835 End.Bal. $ 12,975 Allowance for Doubtful Accounts Beg.Bal. $1,000 $ 420 Inventory Beg.Bal. $ 2,800 Feb-05 $ 9,750 $ 7,805 Feb-06 $ 260 $ 2,310 Feb-18 $ 1,100 Feb.26a Feb.10b $ 718 Feb.29b Feb.15b Feb.150 $ 1,155 $ 195 Feb-17 End.Bal. $ 1,038 End.Bal. $ 3,655 Notes Receivable Interest Receivable Beg.Bal. Beg.Bal. Feb.29d $17 End.Bal. End.Bal. $ 17 Accounts Payable Unearned Revenue Beg.Bal. $1,500 Beg.Bal. $ 4,450 Feb-01 Feb-05 Feb.15a $ 4,450 Feb-17 $ 1,700 $ 9,750 $ 1,500 $ 9,750 $ 600 $ 2,400 Feb-27|| Feb.19a Feb.29a End.Bal. $ 1,300 End.Bal. $o Wages Payable Interest Payable Beg.Bal. Beg.Bal. $ 145 Feb.29c End.Bal. End.Bal. $ 145 Notes Payable Contributed Capiatal Beg.Bal. $ 14,500 Beg.Bal. $ 5,200 End.Bal. $ 14,500 End.Bal. $5,200 Dividends Declared Retained Earnings $ 5,020 Beg.Bal. Beg.Bal. Feb-28 $ 800 End.Bal. $ 5,020 End.Bal. $ 800 Sales Revenue Sales Return & Allowance Beg.Bal. Beg.Bal. $ 16,500 Feb.10a Feb.15d $2,475 $4,450 Feb.15a End.Bal. $ 20,950 End.Bal. $ 2,475 Sales Discounts Cost of goods sold Beg.Bal. Beg.Bal. Feb.19b $90 Feb.10b $ 7,805 $ 1,155 Feb.15c Feb.156 $2,310 End.Bal. $ 90 End.Bal. $ 8,960 Interest Revenue Bad Debt Expense Beg.Bal. Beg.Bal. Feb.29d Feb.29b $ 718 End.Bal. End.Bal. $ 718 Insurance Expense Interest Expense Beg.Bal. Beg.Bal. Feb-02 $ 600 Feb.29 $ 145 End.Bal. $ 600 End.Bal. $ 145 Rent Expense Utility Expense Beg.Bal. Beg.Bal. Feb.19a $1,500 Feb-27 $ 600 End.Bal. $1,500 End.Bal. $ 600 Wages Expense Beg.Bal. Feb.16 $ 2,400 Feb.29a $2,400 End.Bal. $4,800 WWC, Inc. Income Statement