Project 2 Review of Merchandising Cycle The following inform

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

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 a\\c 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		750

Project 2 Review of Merchandising Cycle The following inform

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