Question

ASAP due tonight!

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	$	19,220		Unearned Revenue (40 units)	$	4,550
Accounts Receivable	$	10,250		Accounts Payable (Jan Rent)	$	1,700
Allowance for Doubtful Accounts	$	(1,100)		Notes Payable	$	15,500
Inventory (45 units)	$	3,600		Contributed Capital	$	5,400
				Retained Earnings – Feb 1, 2012	$	4,820

•	WWC establishes a policy that it will sell inventory at $175 per unit.
•	In January, WWC received a $4,550 advance for 40 units, as reflected in Unearned Revenue.
•	WWC’s February 1 inventory balance consisted of 45 units at a total cost of $3,600.
•	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 Receivable balance is a $1,900 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 $1,900 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 $700 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 150 units of inventory are purchased on account by WWC for $9,000 – terms 2/15, n30.
02/05	WWC paid Federal Express $600 to have the 150 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 120 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
02/15	The 40 units that were paid for in advance and recorded in January are delivered to the customer.
02/15	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.
02/16	WWC pays the first 2 weeks wages to the employees. The total paid 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 $1,200.
02/19	$3,400 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 $8,400 of customers’ Accounts Receivable. Of the $8,400, the discount was taken by customers on $5,500 of account balances; therefore WWC received less than $8,400.
02/26	WWC recovered $440 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $700 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $400 cash dividend.

Adjusting Entries:

02/29	Record the $2,600 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 month’s interest earned Kit Kat’s note (see 02/01). I need help making the journal entries! Help ASAP thank you!

Answer 1

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.