Prepare all February journal entries and adjusting entries. February Transaction
ID: 2368295 • Letter: P
Question
Prepare all February journal entries and adjusting entries.
February Transactions
02/01 Included in JWC’s February 1 Accounts Receivable balance is a $2,000 account due from Kit Kat, a JWC customer.Kit Kat is having cash flow problems and cannot pay its balance at this time. JWC arranges with Kit Kat to convert the $2,000 balance to a note, and Kit Kat signs a 6-month note, at 12% interest. The principal and all interest will be due and payable to JWC on August 1, 2008.
02/02 JWC paid a $500 insurance premium covering the month of February. The amount paid is recorded directly as anexpense.
02/05 An additional 150 units of inventory are purchased on account by JWC for $14,100 – terms 3/10, n30; FOB Destination.
02/10 Sales of 110 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30.
02/15 The advance order for 40 units from January is delivered to the customer.
02/15 20 units of the inventory that had been sold on 2/10 are returned to JWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are identified as being from the batch that was acquired on 02/05.
02/16 JWC pays the first 2 weeks wages to the employees. The total paid $1,500.
02/17 Paid in full the amount owed for the 02/05 purchase of inventory.
Explanation / Answer
02/01
Debit: Account Receivable 2240
Credit: Notes Payable 2000
Credit: Interest Payable 240
*Interest = $2000*1period*0.12 (percent) = $240
02/02
Debit: Insurance Expense $500
Credit: Prepaid Insurance $500
02/05
Debit: Inventory $14,100
Credit: Account Payable $14,100
02/10
* $14100/110 units = $94/1unit
*selling inventory, using FIFO: $2730 [beg 30 units] + ($94/1unit)*(80 units) = $10250
Debit: Sales $10250
Credit: Inventory $10250
02/15
CANNOT MAKE JOURNAL
02/15
*return inventory, use FIFO
20units*$94= $1880
Debit: Inventory $1880
Credit: Account Receivable $1880
02/16
Debit: Wages Payable 1500
Credit: Cash 1500
02/17
*17th from the 5th is 13 days. It is over the 10 day discount period, so pay net amount.
Debit: Account Payable 14100
Credit: Cash 14100