Adjusting entries and financial statements

Assignment Help Financial Accounting

Reference no: EM13922497

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	$	21,320	Unearned Revenue (45 units)	$	5,250
Accounts Receivable	$	12,350	Accounts Payable (Jan Rent)	$	3,100
Allowance for Doubtful Accounts	$	(1,800)	Notes Payable	$	15,000
Inventory (50 units)	$	4,250	Contributed Capital	$	6,800
			Retained Earnings - Feb 1, 2012	$	5,970

	WWC establishes a policy that it will sell inventory at $175 per unit.
	In January, WWC received a $5,250 advance for 45 units, as reflected in Unearned Revenue.
	WWC's February 1 inventory balance consisted of 50 units at a total cost of $4,250.
	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 $1,600 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 $1,600 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 $950 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 45 units that were paid for in advance and recorded in January are delivered to the customer.
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 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 $1,900.
02/19	$6,200 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 $9,800 of customers' Accounts Receivable. Of the $9,800, the discount was taken by customers on $7,000 of account balances; therefore WWC received less than $9,800.
02/26	WWC recovered $580 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $850 utility bill for February arrived. It is due on March 15 and will be paid then.
02/28	WWC declared and paid a $750 cash dividend.

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).

1-a.

Prepare all February journal entries and adjusting entries.

Included in WWC's February 1 Accounts Receivable balance is a $1,500 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 $1,600 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.

2.WWC paid a $950 insurance premium covering the month of February. The amount paid is recorded directly as an expense.

3.An additional 160 units of inventory are purchased on account by WWC for $12,000 - terms 2/15, n30.

4.WWC paid Federal Express $320 to have the 160 units of inventory delivered overnight. Delivery occurred on 02/06.

5.Record the sales of 130 units of inventory.

6.Record the cost of goods sold for 130 units.

7.Record the unearned revenue for 45 units paid in advance.

8.Record the cost of goods sold for 45 units.

9.Record the 15 units of inventory returned

10.Record the sales return and allowance.

11.WWC pays the first 2 weeks wages to the employees. The total paid is $2,600.

12.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.

13.Wrote off a customer's account in the amount of $1,900.

14.$6,200 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.

15.Collected $9,800 of customers' Accounts Receivable. Of the $9,800, the discount was taken by customers on $7,000 of account balances; therefore WWC received less than $9,800.

16.Record the entry to reversal of allowance for doubtful accounts.

17.Record the entry to recovered $580 cash from the customer.

18.A $850 utility bill for February arrived. It is due on March 15 and will be paid then.

19.WWC declared and paid a $750 cash dividend.

20.Record the $2,600 employee salary that is owed but will be paid March 1.

21.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.

22.Record February interest expense accrued on the note payable.

23.Record one month's interest earned Kit Kat's note (see 02/01).

Post all February entries (transactions and adjustments) to the T-accounts.

Cash, Accounts Receivable, Allowance for Doubtful Accounts, Inventory, Notes Receivable, Interest Receivable, Accounts Payable, Unearned Revenue, Wages Payable, Interest Payable, Notes Payable, Contributed Capital, Retained Earnings, Dividends Declared, Sales Revenue, Sales Returns & Allowances, Sales Revenue, Sales Discounts, Cost of Goods Sold, Interest Revenue, Bad Debt Expense, Insurance Expense, Interest Expense, Rent Expense, Utility Expense, and Wages Expense.

Prepare the financial statements at the end of February.

Income Statement, Statement of Retained Earnings, Balance Sheet

Prepare all February 29 closing entries for WWC. Post to the T-Accounts in requirement 1-b.

1.Record the entry to close sales revenue , interest revenue, sales returns and allowances, sales discounts.

2.Record the entry to close expenses.

Record the entry to close dividends

What is the WWC's gross profit for February?

What is the gross profit percentage?

What were WWC's net sales for February?

If WWC had chosen to use the percentage of sales method, taking 2% of sales, instead of using the aging method, WWC would have reported _________ of bad debt expense for February and a net Accounts Receivable of __________.

How many units are in ending inventory?

What is the cost per unit of the ending inventory?

If WWC had chosen LIFO, calculate its February cost of goods sold.

Reference no: EM13922497

Questions Cloud

Determine the minimum number of workers needed : Determine the minimum number of workers needed, and a schedule for the following staffing requirements, giving workers two consecutive days off per cycle (not including Sunday).

Independence violations negatively : How might the independence violations negatively affect auditors.

Calculations of net cash flow after tax : Construct a table showing your calculations of net cash flow after tax (NCFAT). Use the method shown in lectures and notes.

Executive summary on veteran affairs : Review the case on loss of personal information and be able to make conclusions based on your findings on the VA case and loss of private information.

Adjusting entries and financial statements : 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.

What is the purpose of a payroll register : What is the purpose of a payroll register? Explain what city income taxes are. Give examples

What costs would be involved in transitioning to such system : Describe how that approach might work at the restaurant and why that could be expected to reduce waiting times. What costs would be involved in transitioning to such a system?

Database implementation in mysql : After receiving 21 different setups, the management of Oak Creek Stadium has decided on the attached ER diagram and instance tables for the development of a database to keep track of its operations.

Prove the agreement of the control account : Insert the beginning balances in the Accounts Payable control and subsidiary accounts, and post the October transactions to these accounts. Prove the agreement of the control account and the subsidiary account balances

User Account

All Pages