project2 accounting - Name ACC 2013 FALL 2010 Project 2(15...

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Name __________________________________________ ACC 2013 FALL 2010 Project 2 (15 pts) # ____________ All work must be WRITTEN. No credit will be given for computer generated projects. 1 Project 2 -- Review of Merchandising Cycle This Project is due the beginning of class (MW or MWF Classes Monday October 18) and TTH is due beginning of class October 19 Introduction Wally’s Widget Company (WWC) incorporated near the end of 2007. Operations began in January of 2008. WWC prepares adjusting entries and financial statements at the end of each month. The statements report monthly results for the period February 1-29, 2008. Pertinent items of general information: Beginning Balances from 1/31/08 Cash $23,420 Unearned Revenue (40 units) $6,000 Accounts Receivable $9,510 Accounts Payable (Jan Rent) $1,300 Allowance for Doubtful Accounts ($900) Notes Payable $18,000 Inventory (30 units) $2,790 Contributed Capital $5,000 Retained Earnings – Feb 1, 2008 $4,520 x WWC establishes a policy that it will sell inventory at $150 per unit. x In January, WWC received a $6,000 advance for 40 units, as reflected in Unearned Revenue. x WWC’s February 1 inventory balance consisted of 30 units at a total cost of $2,790. x WWC’s note payable accrues interest at a 10% annual rate. x 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 $3,000 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot its balance at this time. WWC arranges with Kit Kat to convert the $3,000 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 WWC on August 1, 2008.
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