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:

Cash	$	20,420		Unearned Revenue (35 units)	$	4,950
Accounts Receivable	$	11,450		Accounts Payable (Jan Rent)	$	2,500
Allowance for Doubtful Accounts	$	(1,500)		Notes Payable	$	16,000
Inventory (40 units)	$	3,600		Contributed Capital	$	6,200
				Retained Earnings – Feb 1, 2012	$	4,320

•	WWC establishes a policy that it will sell inventory at $145 per unit.
•	In January, WWC received a $4,950 advance for 35 units, as reflected in Unearned Revenue.
•	WWC’s February 1 inventory balance consisted of 40 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 $1,800 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 $1,800 balance to a note, and Kit Kat signs a 6-month note, at 9% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012.
02/02	WWC paid a $650 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 160 units of inventory are purchased on account by WWC for $12,000 – terms 2/15, n30.
02/05	WWC paid Federal Express $320 to have the 160 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 130 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
02/15	The 35 units that were paid for in advance and recorded in January are delivered to the customer.
02/15	10 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 $2,000.
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 $1,600.
02/19	$5,000 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 $9,200 of customers’ Accounts Receivable. Of the $9,200, the discount was taken by customers on $6,500 of account balances; therefore WWC received less than $9,200.
02/26	WWC recovered $520 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $550 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $650 cash dividend.

Adjusting Entries:

02/29	Record the $2,000 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). 1-a. 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.) 1-b. Post all February entries (transactions and adjustments) to the T-accounts.

Answer 1

Fecha	Account name		Cargo	Abono
01-feb	No journal entry is required
02-feb	Insurance expenses		$ 650
	Debts to pay			$ 650
	Debts to pay		$ 650
	Cash			$ 650
	Spending center		$ 650
	Account of chargeable charges			$ 650
05-feb	Purchases		$ 12,000
	Debts to pay			$ 12,000
	Inventory		$ 12,000
	inventory variation			$ 12,000
05-feb	Other management expenses		$ 320
	Debts to pay			$ 320
	Debts to pay		$ 320
	Cash			$ 320
	Expense center		$ 320
	Imputable accounts			$ 320
10-feb	Accounts receivable		$ 3,900
	Sales			$ 3,900
	Cost for Sales		$ 3,900
	Inventory			$ 3,900
15-feb	Sales		$ 4,950
	Advances Received			$ 4,950
15-feb	Inventory		$ 300
	Cost of inventory			$ 300
	Sales		$ 300
	Accounts Receivable			$ 300
16-feb	Employee Salary		$ 2,000
	Salary to be paid			$ 2,000
	Salary to be paid		$ 2,000
	cash			$ 2,000
	Expense center		$ 2,000
	Imputable accounts			$ 2,000
17-feb	No journal entry is required
18-feb	No journal entry is required
19-feb	Rental costs		$ 2,500
	Debts to pay			$ 2,500
	Debts to pay		$ 2,500
	Cash			$ 2,500
	Expense center		$ 2,500
	Imputable accounts			$ 2,500
19-feb	Cash		$ 6,500
	Discounts Granted		$ 2,700
	Accounts receivable			$ 9,200
26-feb	Cash		$ 520
	Accounts receivable			$ 520
27-feb	Service Expense		$ 550
	Debts to pay			$ 550
	Expense center		$ 550
	Imputable accounts			$ 550
28-feb	Personnel expenses - Shareholders		$ 650
	Dividends payable			$ 650
	Dividends payable		$ 650
	Cash			$ 650
	Expense center		$ 650
	Imputable accounts			$ 650
29-feb	Employee Salary		$ 2,000
	Salary to be paid			$ 2,000
	Expense center		$ 2,000
	Imputable accounts			$ 2,000
29-feb	Interest expenses of the pagare		$ 160
	Accrued interest			$ 160
	Expense center		$ 160
	Imputable accounts			$ 160
29-feb	Accounts receivable		$ 13.5
	Other Management Income - interests			$ 13.5
29-feb	Doubtful collection account		$ 114.4
	accounts receivable			$ 114.4

Efectivo			Cuentas por Cobrar			Cobranza dudusa			Inventario
$ 20,420	$ 650		$ 11,450	$ 300			-$ 1,500		$ 3,600	$ 3,900
$ 6,500	$ 320		$ 3,900	$ 9,200			-$ 114.4
$ 520	$ 2,000		$ 13.5	$ 520
Anticipos Recibidos			Cuentas por pagar			pagare			capital
4,950	$ 4,950		$ 650	2,500			16,000			6,200
				$ 320
				$ 2,500
				$ 550
Ingreso Retenido			Compras			Costo por Ventas			Descuentos Concedidos
	4,320		$ 12,000			$ 3,900			$ 2,700
Gastos de seguro			Cuenta de cargas imputables			variacion de inventario			Dividendos por pagar
$ 650			$ 650			$ 12,000			$ 650	$ 650
$ 650			$ 320			$ 300
$ 320			$ 2,000
$ 2,000			$ 2,500
$ 2,500			$ 550
$ 550			$ 650
$ 650			$ 2,000
$ 2,000			$ 160
$ 160
Gastos de personal - Accionistas			Gasto de Servicio			Gastos de interes del pagare			Intereses por Devengar
$ 650			$ 550			$ 160				$ 160
			$ 2,500
Otros gastos de gestion			Otros Ingresos de Gestion - intereses			Ventas			Salario de Empleados
$ 320				$ 13.5			$ 3,900		$ 2,000
						$ 4,950			$ 2,000
						$ 300
Salario por pagar
	$ 2,000
$ 2,000	$ 2,000