Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began
ID: 2582320 • Letter: W
Question
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 $1,400 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 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 overnight. Delivery occurred on 02/06.
Sales of 150 units of inventory occurred during the period of 02/07 – 02/10. The 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.
25 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.
$6,600 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 Receivable. Of the $10,000, the 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 been written off (see 02/18).
A $950 utility bill for February arrived. It is due on March 15 and will be paid then.
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 determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts.
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.)
Post all February entries (transactions and adjustments) to the T-accounts.
Prepare the financial statements at the end of February. (Balance Sheet only, items to be deducted must be indicated with a negative amount.)
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
1a)
Feb 01
Notes Receivable - debit - $1,400
To Accounts receivable - credit - $1,400
Feb 02
Insurance expense - debit $650
To Cash - credit $650
Feb 05
Inventory - debit $13,500
To Accounts payable - credit $13,500
Feb 05
Inventory - debit $360
To Cash - credit $360
Feb 10
Accounts receivable - debit $27,000
To Sales Revenue -credit $27,000
Feb 10b
Cost of goods sold - debit $11,250
(150 units at $75)
To Inventory - credit $11,250
Feb 15
Unearned revenue - debit 5,350
To Sales revenue - credit $5,350
Feb 15b
Cost of goods sold - Debit $1,875
(30 units at $75)
To Inventory - Credit $1,875
Feb 15c
Inventory - Debit $1,875
Cost of goods sold - Credit 1,875
(30 units at $75)
Feb 15d
Sales returns and allowance - debit $4,500
(25 units at $180 per unit)
To Accounts Receivable - Credit $4,500
Feb 16
Wage expenses - debit $2,400
To Cash - credit $2,400
Feb 17
Accounts payable - debit $13,500
To cash - credit $13,230
To inventory - credit $270
Feb 18
Allowance for doubt full accounts - debit $2,000
To Accounts receivable - credit $2,000
Feb 19
Accounts payable - debit $3,300
Rent expense - debit $3,300
To Cash - credit $6,600
Feb 19a
Cash - debit $9,840
Sales discounts - debit $160
To Accounts receivable - credit 10,000
Feb 26a
Accounts receivable - debit $600
To Allowance for doubt full debts $600
Feb 26b
Cash - debit $600
To Accounts receivable - credit $600
Feb 27
Utility expense - $950
To Accounts payable - credit $950
Feb 28
Dividends declared - debit $950
To Cash - credit $950
Feb 29a
Wages expense - debit $2,800
To Wage payable - credit $2,800
Feb 29b
Bad debt expenses - debit $1,152
150 sales -25 units returned = 125 units,
125units* $180 = $22,500-$10,000(cash received)
$12,500+$1,900 = $14,400*8% =
To Allowance for doubt full debts - credit $1,152
Feb 29c
Interest expenses - Debit $160
($16,000*12%= $1920/12 months =$160 per month)
To Interest Payable - Credit $160
Feb 29d
Interest Receivable - Debit $14
($1,400*12%= $168*1/12 months =$14 per month)
To Interest Revenue - Credit $14
Please Note: 1) In case one question with multiple subparts, only first 4 subparts needs be answered as a mandatory requirement and
2) In case of multiple questions only first question (full) with minimum 4 sub parts (in case of more sub parts) needs to be answered as a mandatory requirement.
I have passed journal entries and adjusting entries for entire February month transactions which is more than 4.
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