Project 2 0.06878278822396722 1510702552403 Project 2: Review of Merchandising C

Question

Project 2 0.06878278822396722 1510702552403 Project 2: Review of Merchandising Cycle The following information applies to the questions displayed below Waly'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 Accounts Recelvable Allowance for Doubtful Accounts memory unts) 21320 Unearned Revenue (45 unlts) 12,350 Accounts Payable (Jan Rent) (L800) S 4,250 Contributed Capital $ 5.250 $ 3,100 $15,000 6,800 Retained Earnings-Feb 1, 2012 5,970 Notes Payable WWC establishes a pollcy that it will sell Inventory at $175 per unit. ·in January, wwC receved a S5,250 advance for 45 units, as renec ted in unearned Revenue WWC's February 1 inventory balance consisted of 50 units at a total cost of $4,250 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 02/01 Included in WWC's February 1 Accounts Recelvable balance is a $1600 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 $1,600 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 w on August 2012. 0202 wwc paid S950 insurance premlum covering the month of February The smount pald s recorded 02/05 An additional 160 units of Inventory are purchased on account by wwc 02/05 WWC paid Federal Express $320 to have 02n0 Sales of 130 unts of inventory occurred during the period of 02/07 02/15 The 45 units that were paid for in advance and recorded in January are delivered to the customer directly as an expense. n30 occurred on 02/06 2/10, net 30 for $12,000-terms 2/15, the 160 units of inventory delivered overnight. Delivery -0210. The sales terms are 02/15 15 units of the inventory that had been soid on 210 are retuned to WWC. The units are not damaged and can be resoid. Therefore, they are returned to iInventory Assume the units returned are from the 2/05 prchase 02n6 wwC pays the frst 2 weeks wages to the employees. The total paild is $2.600 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 customer's account in the amount of $1,900 0219 $6,200 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directy to expense. customers on $7,000 of account balances; therefore WWC received less than $9,800 esc

Explanation / Answer

Willey Widget Company General Journal for the moth of February 2012 Date Account Debit Credit Feb.1 Note receivable 1600 Accounts receivable 1600 (To record conversion of accounts receivable to note receivable) Feb.2 Insurance expense 950 Cash 950 (To record the insurance premium paif for February) Feb.5 Inventory 12000 Accounts payable 12000 (To record purchase of 160 units ) Inventory 320 Cash 320 (To record freight paid on purchase of 160 units) Feb.10 Accounts receivable 22750 Sales revenue 22750 (To record sales of 130 units from 02/07 to 02/10) Cost of goods sold 10410 Inventory 10410 (To record cost of goods sold for 140 units) Feb.15 Unearned revenue 5250 Sales revenue 5250 (To record delivery of 40 units against advance received in January) Cost of goods sold 3465 Inventory 3465 (To record cost of goods for 40units sold @$77 per unit) Feb.15 Sales returns and allowances 2625 Accounts receivable 2625 (To record retun of 15 units sold on 02/10) Inventory 1155 Cost of goods sold 1155 (To record cost of the 15 units returned) Feb.16 Salaries and Wages expense 2600 Cash 2600 (To record payment of wages for the first two weeks) Feb.17 Accounts payable 12000 Cost of goods sold 240 Cash 11760 (To record payment to supplier) Feb.18 Bad debt expense 1900 Accounts receivable 1900 (To record write off of customer account) Feb.19 Rent expense 3100 Accounts payable 3100 Cash 6200 (To recrd payment of rent for January and February) Cash 9660 Sales discounts 140 Accounts receivable 9800 (To record collection from custmeors) Feb.26 Cash 580 Bad debt expense 580 (To record recovery of amount from account written of on 02/18) Feb.27 Utility expense 850 Accounts payable 850 (To record utility bill ) Feb.28 Dividends 750 Cash 750 (To record cash dividend paid) Willey Widget Company Adjustment Journal for the moth of February 2011 Date Account Debit Credit Feb.29 Salaries and Wages expense 2600 Salaries and Wages payable 2600 (To record wages accrued) Feb.29 Allowance for doubtful accounts 266 Bad debt expense 266 (To record the wirte back of excess allowance ) Feb.29 Interest expense 150 Interest payable 150 (To record interest on note payable fo February @12% p.a.) Feb.29 Interest receivable 16 Interest revenue 16 (To record interest earned on note receivable @9% of Kit Kat) Workings: Cost of goods sold Sale of 130 units from 02/07 to 02/10 Beginning inventory of 50 units 4250 Balance 80 units from 02/05 purchase 6160 @$77 per unit (12,000+320)/160 10410 Allowance for doubtful accounts Opening balance of accounts receivable 12350 Add: Sales during february 28000 40350 Less: Advance received in January 5250 35100 Less: Returns 2625 32475 Less: Converted to note receivable 1600 30875 Less: Collections 9800 21075 Less: written off 1900 19175 8% allowance on this balance 1534 Balance of allowance as at 02/01 1800 Allowance to be written back 266 Willey Widget Company Trial balance as at 29.02.2012 Opening Transactions Unadjusted Adjustments Adjusted Income statement Balance Sheet Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 21320 10240 22580 8980 8980 8980 Accounts receivable 12350 22750 15925 19175 19175 19175 Allowance for doubtful accounts 1800 1800 266 1534 1534 Inventory 4250 13475 13875 3850 3850 3850 Unearned revenue 5250 5250 0 0 0 Accounts payable 3100 15100 12850 850 850 850 Wages payable 0 2600 2600 2600 Interest payable 0 150 150 150 Interest receivable 0 16 16 16 Notes receivable 1600 1600 1600 1600 Notes payable 15000 15000 15000 15000 Common stock 6800 6800 6800 6800 Retained earnings 5970 5970 5970 6687 Dividends 750 750 750 0 Sales revenue 0 28000 28000 28000 28000 Sales returns and allowances 2625 2625 2625 2625 Interest revenue 0 16 16 16 Sales discount 140 140 140 140 Cost of goods sold 13875 1395 12480 12480 12480 Insurance expense 950 950 950 950 Wages expense 2600 2600 2600 5200 5200 Bad debt expense 1900 580 1320 266 1054 1054 Rent expense 3100 3100 3100 3100 Utility expense 850 850 850 850 Interest expense 0 150 150 150 Net Income 1467 T o t a l 37920 37920 95205 95205 58420 58420 3032 3032 60920 60920 28016 28016 33621 33621 Cash Accounts receivable Allowance for doubtful accounts Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Beg.bal. 21320 950 Feb.2 Beg.bal. 12350 1600 Feb.1 Feb.29 266 1800 Beg.bal. Feb.19 9660 320 Feb.5 Feb.10 22750 2625 Feb.15 Feb.19 580 2600 Feb.16 1900 Feb.18 11760 Feb.17 9800 Feb.19 266 1800 6200 Fe.19 1534 End.Bal. 750 Feb.28 35100 15925 31560 22580 End.bal. 19175 End.bal. 8980 Inventory Interest receivable Unearned revenue Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Beg.bal. 4250 10410 Feb.10 Feb.29 16 Feb.15 5250 5250 Beg.bal. Feb.5 12000 3465 Feb.15 Feb.5 320 16 0 5250 5250 Feb.15 1155 End.bal. 16 17725 13875 End.bal. 3850 Accounts payable Wages payable Interest payable Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.17 12000 3100 Beg.bal. 2600 Feb.29 150 Feb.29 Feb.19 3100 12000 Feb.5 850 Feb.27 0 2600 0 150 15100 15950 2600 End.bal. 150 End.bal. 850 End.bal. Notes receivable Notes payable Common stock Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.1 1600 15000 Beg.bal. 6800 Beg.bal. 1600 0 0 15000 0 6800 End.bal. 1600 15000 End.bal. 6800 End.bal. Retained earnings Dividends Sales revenue Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.29 750 5970 Beg.bal. Feb.28 750 750 Feb.29 22750 Feb.10 Feb.29 750 750 5250 Feb.15 0 28000 28000 End.bal. Sales returns and allowances Sales discounts Cost of goods sold Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.15 2625 Feb.19 140 Feb.10 10410 1155 Feb.15 2625 0 140 0 Feb.15 3465 240 Feb.17 End.bal. 2625 End.bal. 140 13875 1395 End.bal. 12480 Rent Expense Wages expense Utility expense Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.19 3100 Feb.16 2600 Feb.27 850 Feb.29 2600 3100 0 5200 0 850 0 End.bal. 3100 End.bal. 5200 End.bal. 850 Insurance expense Bad debt expense Interest revenue Date Debit Credit Date Date Debit Credit Date Date Debit Credit Date Feb.2 950 Feb.18 1900 580 Feb.19 16 Feb.29 266 Feb.29 950 0 1900 846 0 16 End.bal. 950 End.bal. 1054 16 End.bal. Interest expense Date Debit Credit Date Feb.29 150 150 0 End.bal. 150 Willey Widget Company Income statement for the moth ending February 29, 2012 Sales Revenue 28000 Less: Sales Returns 2625 Less: Sales discounts 140 -2765 Net sales 25235 Cost of goods sold 12480 Gross margin 12755 Operating expenses Wages expense 5200 Rent expense 3100 Bad debt expense 1054 Insurance expense 950 Utilitiy expense 850 Total operating expenses 11154 Operating income 1601 Non operating items Interest expense 150 Interest income -16 Total non operating expenses 134 Net income before taxes 1467 Willey Widget Company Balance sheet as at February 29, 2012 Assets Cash 8980 Accounts receivable 19175 Less: Allowance for doubtful accounts -1534 17641 Inventory 3850 Note receivable 1600 Interest receivable 16 Total Assets 32087 Liabilities and equity Accounts payable 850 Interest payable 150 Wages payable 2600 Notes payable 15000 Totalliabilities 18600 Common stock 6800 Retained earnings as at 02/01 5970 Net income 1467 7437 Dividends paid -750 Retained earnings as at 02/29 6687 Total stockholders' equity 13487 Total liabilities and equity 32087 Willey Widget Company Statement of retained earnings as at February 29, 2012 Beginning balance as at Feb.1 4270 Add: Net income 1467 5737 Less: Dividends paid -750 Ending balance as at Feb.29 4987 Allowance for doubtful accounts Opening balance of accounts receivable 12350 Add: Sales during february 28000 40350 Less: Advance received in January 5250 35100 Less: Returns 2625 32475 Less: Converted to note receivable 1600 30875 Less: Collections 9800 21075 Less: written off 1900 19175 8% allowance on this balance 1534 Balance of allowance as at 02/01 1800 Allowance to be written back 266

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