Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began
ID: 2551531 • 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 $1,300 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 $1,300 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 $400 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.
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.
$4,000 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.
Collected $8,700 of customers’ Accounts Receivable. Of the $8,700, the discount was taken by customers on $4,000 of account balances; therefore WWC received less than $8,700.
WWC recovered $470 cash from the customer whose account had previously been written off (see 02/18).
A $850 utility bill for February arrived. It is due on March 15 and will be paid then.
Record the $2,900 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:
T:| CZto.mnoducatior.com/hm.tpx?--0.4262321 777536824_1521922130942 - -- transaction-event select "NoJournal Entry Required"inthefirst account feldT A hegg Study TEXTBOOK SOLUTIONS SAPSRT OA View transaction list I submit one question per post (D 2 Geta fast expert answer within hours 3 Post up to 20 questions per month Journal entry worksheet 20 23 wwc decldes to use the aging method to estimate uncollectible accounts. wwC determines 896 of the ending balance is the appropriate end of February eslimale of uncolleclitle acxounls the ening balance is the appropriale crid of Fcbruary estiale of uncolkclible acounts 02/29 Rcod February interest cxpense accrued on the note payabk 02129 Record one month's interest earned Kit Kat's note (see 02/01 Note: Enter debits betore credits. Date General Journal Debit Credit Feb. 20b d Debt Experise toDoubtul Accounts Select subjecto we car ind te rghi Chegg Ex Post quest Record entry Clear entry View general journal 20 questons rem 1-b. Past all February entnes (transactons and adjustments)to the 1-accounts Cash Accounts Receivable Heg. bal cb. 19b 19,670 0,520 Beg. bal 10.700 400 Fob.2 cb 10a 23,250 1,300 Feb. 1 CHEG RESOURCES TEXTBOOK LINKS O lype hene to searchExplanation / Answer
Date Journal Entries Amount (Dr.) Amount (Cr.) Feb 1. Notes Receivable $1,300 Accounts Receivable $1,300 (6-month note from KitKat company @ 12% annual interest) Feb 2. Insurance Premium $400 Cash $400 Feb 5. Inventory $13,500 Accounts Payable $13,500 Feb 5. Delivery Charges $360 Federal Express $360 Feb 10. Accounts Receivable $23,250 Sales (150 units @ $155 each) $23,250 Feb 15. Unearned Revenue $4,700 Sales $4,700 Feb 15. Sales Return (20 units @ $155 each) $3,100 Accounts Receivable $3,100 Feb 16. Wages $2,900 Cash $2,900 Feb 17. Accounts Payable $13,500 Cash $13,230 Purchase Discount $270 Feb 18. Bad Debts $100 Allowance for Doubtful Debts $1,250 Accounts Receivable $1,350 Feb 19. Rent $2,000 Accounts Payable $2,000 Cash $4,000 Feb 19. Cash $8,620 Discount on Sales (2% of $4,000) $80 Accounts Receivable $8,700 Feb 26. Cash $470 Bad Debts Recovered $470 Feb 27. Utility Expenses $850 Accounts Payable $850 Feb 28. Dividend $700 Cash $700 Feb 29. Wages $2,900 Accounts Payable $2,900 Feb 29. Bad Debts $1,560 Allowance for Doubtful Debts (8% of $19,500 ***) $1,560 Feb 29. Interest Expenses ($13,500 * 1% monthly) $135 Interest on Notes Payable $135 Feb 29. Interest on Notes Receivable $13 Interest Income ($1,300 * 1% monthly) $13 *** Account Receivale Ending Balance calculation :- Opening Balance $10,700 Less: Converted to Notes Receivable on Feb 1. -$1,300 Add: Sales on Feb 10. $23,250 Less: Sales Return on Feb 15. -$3,100 Less: Bad Debts Recorded on Feb 18. -$1,350 Less: Cash Received on Feb 19. with Discount -$8,700 Ending Balance $19,500
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