Project 2: Review of Merchandising Cycle [The following information applies to t
ID: 2396196 • 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 $2,000 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 $2,000 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 $750 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 25 units that were paid for in advance and recorded in January are delivered to the customer.
20 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.
$5,400 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.
Collected $9,400 of customers’ Accounts Receivable. Of the $9,400, the discount was taken by customers on $6,000 of account balances; therefore WWC received less than $9,400.
WWC recovered $540 cash from the customer whose account had previously been written off (see 02/18).
A $650 utility bill for February arrived. It is due on March 15 and will be paid then.
Record the $2,200 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.
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
Wally's Widget Company
Journal Enteries
Adjusting Enteries
Purchase Cost of Merchandise sold Inventory
Trail Balance
As at 29.2.2012
Statement Income
Less:
Statement of Retained Earnings
Balancesheet
As at 31.12.2012
Date Particulars Debit in $ Credit in $ 1.2.2012 Notes Receivable a/c Dr. 1600 To accounts receivable 1600 2.2.2012 Insurance Expense Dr. 950 To cash 950 5.2.2012 Inventory a/c Dr. 12000 To accounts payble 12000 5.2.2012 Inventory a/c Dr. 320 To cash 320 10.202012 Accounts Receivable a/c Dr. 22750 To sales 22750 Cost of goods sold a/c Dr. 10410 To inventory 10410 15.2.2012 Unearned revenue a/c Dr. 5250 To sales 5250 Cost of goods sold a/c Dr. 3465 To inventory 3465 15.2.2012 sales return a/c Dr. 2625 To accounts receivable 2625 Inventory a/c Dr. 1201 to cost of goods sold 1201 16.202012 Wages expense a/c Dr. 2600 To cash 2600 17.2.2012 Accounts payble ac Dr. 12000 To cash 11760 To purchase discount 240 18.2.2012 Allowable for doubtful accounts a/c Dr. 1800 Bed debts a/c Dr. 100 To accounts receivable 1900 19.2.2012 cash a/c Dr. 3100 Rent expense a/c Dr. 3100 To cash 6200 19.2.2012 Cash a/c Dr. 9660 Sales disacount a/c Dr. 140 To accounts recievable 9800 26.2.2012 Accounts recivable a/c Dr. 580 To allowance of doubtful accounts 580 Cash a/c Dr. 580 To accounts recievable 580 27.2.2012 Utility expense a/c Dr. 850 To utility payble 850 28.2.2012 Dividend a/c Dr. 750 To cash 750Related Questions
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