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Name ___________________________________________________ ACC 2013 Spring 2013 Project 2 (15 pts) # ________ Project 2 -- Review of Merchandising...

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Name ___________________________________________________ ACC 2013 Spring 2013 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 Check your syllabus for the due date. Introduction 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. The statements report monthly results for the period February 1-29, 2012. Pertinent items of general information: Beginning Balances from 1/31/12 Cash $18,620 Unearned Revenue (30 units) $4,350 Accounts Receivable $9,650 Accounts Payable (Jan Rent) $1,300 Allowance for Doubtful Accounts ($900) Notes Payable $15,000 Inventory (35 units) $2,800 Contributed Capital $5,000 Retained Earnings Feb 1, 2012 $4,520 WWC establishes a policy that it will sell inventory at $145 per unit. In January, WWC received a $4,350 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 $ 1,500 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 $1,500 balance to a note, and Kit Kat signs a 6-month note, at 10% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012. 02/02 WWC paid a $500 insurance premium covering the month of February. The amount paid is recorded directly as an expense. 02/05 An additional 150 units of inventory are purchased on account by WWC for $9,000 terms 2/15, n30. 02/05 WWC paid Federal Express $300 to have the 150 units of inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 120 units of inventory occurred during the period of 02/07 02/10. The sales terms are 2/10, net 30. 02/15 The 30 units that were paid for in advance and recorded in January are delivered to the customer. 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 $2,200. 02/17 Paid in full the amount owed for the 2/05 purchase of inventory. 02/18 Wrote off a custom er’s account in the amount of $1,000. 02/19 $2,600 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. 02/19 Collected $8,000 of customers Accounts Receivable. Of the $8,000, the discount was taken by customers on $5,000 of account balances, therefore WWC received less than $8,000. 02/26 WWC recovered $400 cash from the customer whose account had previously been written off (see 02/18). 02/27 A $500 utility bill for February arrived. It is due on March 15 and will be paid then. 02/28 WWC declared and paid a $600 cash dividend. ****************************************************************************************************************************************************** 02/29 (adjusting 1) Record the $2,200 employee salary that is owed but will be paid March 1. 02/29 (adjusting 2) WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending accounts receivable balance is the appropriate end of February estimate of uncollectible accounts. (Round to the nearest dollar) (Note you will need to post before you can do this adjustment.) 02/29 (adjusting 3) Record February interest expense accrued on the note payable. 02/29 (adjusting 4) Record one month’s interest earned Kit Kat’s note (see 02/01)
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Name ___________________________________________________ ACC 2013 Spring 2013 Project 2 (15 pts) # ________ All work must be WRITTEN. No credit will be given for computer generated projects. 2 REQUIREMENT 1 A Prepare all February journal entries and adjusting entries. Use Attachment A to record the entries. B. Post all February entries (transactions and adjustments) to the T-accounts provided in Attachment B. C. Prepare the financial statements at the end of February, 2008 using the formats in Attachment C. ATTACHMENT A WWC General Journal Date Account Name Debit Credit 02/01 02/02 02/05 2/06 02/10 2/15 2/15 2/16 2/17 2/18 2/19 2/19
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