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Wallys 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. Balances in the accounts at the end of January are as follows:

Cash	$	19,520		Unearned Revenue (25 units)	$	4,650
Accounts Receivable	$	10,550		Accounts Payable (Jan Rent)	$	1,900
Allowance for Doubtful Accounts	$	(1,200)		Notes Payable	$	13,000
Inventory (30 units)	$	2,100		Contributed Capital	$	5,600
				Retained Earnings Feb 1, 2012	$	5,820

	WWC establishes a policy that it will sell inventory at $165 per unit.
	In January, WWC received a $4,650 advance for 25 units, as reflected in Unearned Revenue.
	WWCs February 1 inventory balance consisted of 30 units at a total cost of $2,100.
	WWCs 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 WWCs 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 pay 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 8% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012.
02/02	WWC paid a $800 insurance premium covering the month of February. The amount paid is recorded directly as an expense.
02/05	An additional 170 units of inventory are purchased on account by WWC for $12,750 terms 2/15, n30.
02/05	WWC paid Federal Express $340 to have the 170 units of inventory delivered overnight. Delivery occurred on 02/06.
02/10	Sales of 140 units of inventory occurred during the period of 02/07 02/10. The sales terms are 2/10, net 30.
02/15	The 25 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 $2,800.
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 customers account in the amount of $1,200.
02/19	$3,800 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 $8,600 of customers Accounts Receivable. Of the $8,600, the discount was taken by customers on $6,500 of account balances; therefore WWC received less than $8,600.
02/26	WWC recovered $460 cash from the customer whose account had previously been written off (see 02/18).
02/27	A $800 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.

Adjusting Entries:

02/29	Record the $2,800 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 months interest earned Kit Kats note (see 02/01). 1-a. Prepare all February journal entries and adjusting entries. 1. Included in WWCs 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 pay 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 8% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012. 2. WWC paid a $800 insurance premium covering the month of February. The amount paid is recorded directly as an expense. 3. An additional 170 units of inventory are purchased on account by WWC for $12,750 terms 2/15, n30. 4. WWC paid Federal Express $340 to have the 170 units of inventory delivered overnight. Delivery occurred on 02/06. 5. Record the sales of 140 units of inventory. 6. Record the cost of goods sold for 140 units. 7. Record the unearned revenue for 25 units paid in advance. 8. Record the cost of goods sold for 25 units. 9. Record the 15 units of inventory returned 10. Record the sales return and allowance. 11. WWC pays the first 2 weeks wages to the employees. The total paid is $2,800. 12. 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. 13. Wrote off a customers account in the amount of $1,200. 14. $3,800 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. 15. Collected $8,600 of customers Accounts Receivable. Of the $8,600, the discount was taken by customers on $6,500 of account balances; therefore WWC received less than $8,600. 16. Record the entry to reversal of allowance for doubtful accounts. 17. Record the entry to recovered $460 cash from the customer. 18. A $800 utility bill for February arrived. It is due on March 15 and will be paid then. 19. WWC declared and paid a $600 cash dividend. 20. Record the $2,800 employee salary that is owed but will be paid March 1. 21. 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. 22. Record February interest expense accrued on the note payable. 23. Record one month's interest earned kit kat's note (see 02/01). 1b. Prepare all February 29 closing entries for WWC. 1. Record the entry to close sales revenue , interest revenue, sales returns and allowances, sales discounts. 2. Record the entry to close expenses. 3. Record the entry to close dividends. 1.c What is the WWCs gross profit for February? 1.d What is the gross profit percentage? 1.e What were WWCs net sales for February? 1.f If WWC had chosen to use the percentage of sales method, taking 2% of sales, instead of using the aging method, WWC would have reported _________ of bad debt expense for February and a net Accounts Recievable of __________. 1. How many units are in ending inventory? 2. What is the cost per unit of the ending inventory 3. If WWC had chosen LIFO, calculate its February cost of goods sold.

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