Project 2: Review of Merchandising Cycle [The following information applies to t
ID: 2580619 • Letter: P
Question
Project 2: Review of Merchandising Cycle
[The following information applies to the questions displayed below.]
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:
Included in WWC’s February 1 Accounts Receivable balance is a $1,600 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 WWC on August 1, 2012.
WWC paid a $950 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
An additional 160 units of inventory are purchased on account by WWC for $12,000 – terms 2/15, n30.
WWC paid Federal Express $320 to have the 160 units of inventory delivered overnight. Delivery occurred on 02/06.
Sales of 130 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
The 45 units that were paid for in advance and recorded in January are delivered to the customer.
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.
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.
$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 directly to expense.
Collected $9,800 of customers’ Accounts Receivable. Of the $9,800, the discount was taken by customers on $7,000 of account balances; therefore WWC received less than $9,800.
WWC recovered $580 cash from the customer whose account had previously been written off (see 02/18).
A $850 utility bill for February arrived. It is due on March 15 and will be paid then.
Record the $2,600 employee salary that is owed but will be paid March 1.
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.
Record one month’s interest earned Kit Kat’s note (see 02/01).
feb 15c. Record the 15 units of inventory returned
Feb 15d. Record the sales return and allowance. (keep getting this one wrong)
Feb 29b.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
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:
Explanation / Answer
Date Account Title and Explanation Debit Credit 15-Feb Sales Return $2,625 Accounts Receivable $2,625 (To record sale return) *$175 x 15 units 15-Feb Inventory $1,125 Cost of Goods Sold $1,125 (To record sale return) *$75 x 15 units Particulars Amount Opening Accounts Receivable $10,550 Converted to Note Payable ($1,600) Sales $22,750 Sales Return ($2,625) Cash Collected ($7,000 x 98%) ($6,860) Cash Collected ($2,800) Additional Bad Debt ($100) Closing Accounts Receivable $19,315 Date Account Title and Explanation Debit Credit 29-Feb Bad Debt Expense $1,545 Allowance for Doubtful Accounts $1,545 (To record bad debt expense) *$19,315 x 8%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.