Included in WWC’s February 1 Accounts Receivable balance is a $1,400 account due
ID: 2585714 • Letter: I
Question
Included in WWC’s February 1 Accounts Receivable balance is a $1,400 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 $1,400 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 $650 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.
25 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.
$6,600 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 $10,000 of customers’ Accounts Receivable. Of the $10,000, the discount was taken by customers on $8,000 of account balances; therefore WWC received less than $10,000.
WWC recovered $600 cash from the customer whose account had previously been written off (see 02/18).
A $950 utility bill for February arrived. It is due on March 15 and will be paid then.
Record the $2,800 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.
1.
What is the WWC’s gross profit for February?
1a.What is the gross profit percentage?
1b.What were WWC’s net sales for February?
2. How many units are in ending inventory?
2a.What is the cost per unit of the ending inventory?
Cash $ 21,620 Unearned Revenue (30 units) $ 5,350 Accounts Receivable $ 12,650 Accounts Payable (Jan Rent) $ 3,300 Allowance for Doubtful Accounts $ (1,900) Notes Payable $ 16,000 Inventory (35 units) $ 2,800 Contributed Capital $ 7,000 Retained Earnings – Feb 1, 2012 $ 3,520Explanation / Answer
1 Gross profit=Sales-Cost of goods sold Total sales: 10-Feb 150 units @ $180 27000 15-Feb 30 units @ $180 5400 15-Feb Return 25 units @ $180 -4500 27900 Cost of goods sold: Date Pariculars Goods remaining Cost of goods sold 1-Feb Balance 35 units @80=$2800 5-Feb Purchase 180 units @$75=$13500 35 units @80=$2800 180 units @$75=$13500 10-Feb Sales 35 units @80=$2800 150 units @ $180 65 units @$75=$4875 115 units @$75=$8625 15-Feb Sales 35 units @75=$2250 30 units @$75=$2250 30 units @ $180 15-Feb Return 25 units @ $180 65 units @$75=$4875 25 units @$75=$1875 Cost of goods sold=2800+8625+2250-1875=11800 Gross profit=27900-11800=16100 1a. Gross profit %=Gross profit/Sales=16100/27900=57.71% 1b.. Net sales=$27900 2 Units in ending inventory=60 units (Refer cost of goods sold table) 2a. Cost per unit=$75 (Refer cost of goods sold table)