I am need of assistance in making journal entries for these transactions Wally\'
ID: 2587655 • Letter: I
Question
I am need of assistance in making journal entries for these transactions
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 Cash Accounts Recelvable Allowance for Doubtful Accounts Inventory (35 units) $ 18,920 Unearned Revenue (30 units) $ 9,950 Accounts Payable (Jan Rent) $ (1,000) Notes Payable $ 2,800 Contributed Capital $ 4,450 $ 1,500 $14,500 $ 5,200 $ 5,020 Retalned Earnings - Feb 1, 2012 WWC establishes a policy that It willl sell Inventory at $165 per unit. WWC's February 1 Inventory balance consisted of 35 units at a total cost of $2,800. WWC will use the FIFO Inventory method and record CoGS on a perpetual basis. . In January, WWC recelved a $4,450 advance for 30 units, as reflected In Unearned Revenue ·WWC's note payable accrues Interest at a 12% annual rate February Transactions 02/01 Included In WWC's February 1 Accounts Recelvable 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 pald a $600 Insurance premlum covering the month of February. The amount pald 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 pald Federal Express $260 to have the 130 units of inventory delivered overnight. Dellvery 02/10 Sales of 100 units of inventory occurred during the perlod of 02/07 - 02/10. The sales terms are 02/15 The 30 units that were paid for In advance and recorded In January are delivered to the customer occurred on 02/06 2/10, net 30 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 pald 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 perlod rather than as a reduction of inventory costs. 02/18 Wrote off a customer's account In the amount of $1,100 02/19 $3,000 of rent for January and February was pald. Because all of the rent will soon explre, the 02/19 Collected $8,200 of customers' Accounts Recelvable. Of the $8,200, the discount was taken by 02/26 WWC recovered $420 cash from the customer whose account had prevlously been written off (see 02/27 A $600 utility bill for February arrived. It is due on March 15 and will be pald then. February portion of the payment is charged directly to expense customers on $4,500 of account balances, therefore WWC recelved less than $8,200 02/18) 02/28 WWC declared and pald a $800 cash dividend. Adjusting Entries 02/29 Record the $2,400 employee salary that Is owed but will be pald March 1 02/29 wwC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the approprlate 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)Explanation / Answer
Willey Widget Company General Journal for the moth of February 2012 Date Account Debit Credit 2/1/2012 Note receivable 1700 Accounts receivable 1700 (To record conversion of accounts receivable to note receivable) 2/2/2012 Insurance expense 600 Cash 600 (To record the insurance premium paif for February) 2/5/2012 Inventory 9750 Accounts payable 9750 (To record purchase of 130 units ) Inventory 260 Cash 260 (To record freight paid on purchase of 160 units) 2/10/2012 Accounts receivable 16500 Sales revenue 16500 (To record sales of 120 units from 02/07 to 02/10) Cost of goods sold 7805 Inventory 7805 (To record cost of goods sold for 150 units) 02/15/2012 Unearned revenue 4450 Sales revenue 4450 (To record delivery of 30 units against advance received in January) Cost of goods sold 2310 Inventory 2310 (To record cost of goods for 30units sold @$77 per unit) 02/15/2012 Sales revenue 2475 Accounts receivable 2475 (To record return of 15 units sold on 02/10) Inventory 1155 Cost of goods sold 1155 (To record cost of the 15 units returned) 02/16/2012 Salaries and Wages expense 2400 Cash 2400 (To record payment of wages for the first two weeks) 02/17/2012 Accounts payable 9750 Cost of goods sold 195 Cash 9555 (To record on account payment for 02/05 purchase) 02/18/2012 Allowance for doubtful accounts 1100 Accounts receivable 1100 (To record wrting off of customer's account balance ) 02/19/2012 Rent expense 1500 Accounts payable 1500 Cash 3000 (To recrd payment of rent for January and February) Cash 8110 Sales discounts 90 Accounts receivable 8200 (To record collection from custmeors) 02/26/2012 Cash 420 Allowance for doubtful accounts 420 (To record recovery of amount from account written of on 02/18) 02/27/2012 Utility expense 600 Accounts payable 600 (To record utility bill ) 02/28/2012 Dividends 800 Cash 800 (To record cash dividend paid) Willey Widget Company Adjustment journal entries for the month of February 2012 02/29/2012 Salaries and Wages expense 2400 Salaries and Wages payable 2400 (To record wages accrued) 02/29/2012 Bad debt expense 718 Allowance for doubtful accounts 718 (To record the provision for bad debts expense ) 02/29/2012 Interest expense 145 Interest payable 145 (To record interest on note payable fo February @12% p.a.) 02/29/2012 Interest receivable 17 Interest revenue 17 (To record interest earned on note receivable @9% of Kit Kat) Workings: Cost of goods sold Sale of 100 units from 02/07 to 02/10 Beginning inventory of 35 units 2800 Balance 65 units from 02/05 purchase 5005 @$77 per unit (9750+260)/130 7805 Allowance for doubtful accounts Ending balance of accounts receivable 12975 Allowance @8% A 1038 Allowance account: Beginning balance 1000 Writtne off in February -1100 Recovered from customer written off 420 Ending balance for February B 320 Balance to be provided now (A - B) 718
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