Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (35 units) $
ID: 2801429 • Letter: C
Question
Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (35 units) $ 18,920 Unearned Revenue (30 units) $ 9,950 Accounts Payable (Jan Rent) $(1,000) Notes Payable $ 2,800 Contributed Capital $ 4,450 $ 1,500 $14,500 $ 5,200 $ 5,020 Retained Earnings - Feb 1, 2012 ·wwc establishes a policy that it will sell inventory at $165 per unit. . In January, WWC received a $4,450 advance for 30 units, as reflected in Unearned Revenue WWC's February 1 inventory balance consisted of 35 units at a total cost of $2,800 ·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 $1,700 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 $1,700 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 $600 insurance premium covering the month of February. The amount paid is recorded directly as an expense 02/05 An additional 130 units of inventory are purchased on account by WWC for $9,750 - terms 2/15, n30 02/05 WWC paid Federal Express $260 to have the 130 units of inventory delivered overnight. Delivery 02/10 Sales of 100 units of inventory occurred during the period of 02/07 - 02/10. The sales terms are 02/15 The 30 units that were paid for in advance and recorded in January are delivered to the customer. occurred on 02/06 2/10, net 30 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 $2,400 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 $1,100 02/19 $3,000 of rent for January and February was paid. Because all of the rent will soon expire, the 02/19 Collected $8,200 of customers' Accounts Receivable. Of the $8,200, the discount was taken by 02/26 WWC recovered $420 cash from the customer whose account had previously been written off (see 02/27 A $600 utility bill for February arrived. It is due on March 15 and will be paid then February portion of the payment is charged directly to expense customers on $4,500 of account balances; therefore WWC received less than $8,200 02/18) 02/28 WWC declared and paid a $800 cash dividend Adjusting Entries 02/29 Record the $2,400 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)Explanation / Answer
In the books of WWC :
Accounts Receivable :
Allowance for Doubtful Accounts
Adjutment Account Titles Debit Credit 02/29 $ $ a. Salaries Expense 2,400 Salaries Payable 2,400 b. Bad Debt Expense 758 Allowance for Doubtful Accounts 758 c. Interest Expense 145 Interest Payable 145 d. Interest Receivable 17 Interest Revenue 17