Required information

[The following information applies to the questionsdisplayed below.]

Wally’s Widget Company (WWC) incorporated near the end of 2011.Operations began in January of 2012. WWC prepares adjusting entriesand financial statements at the end of each month. Balances in theaccounts at the end of January are as follows:

Cash	$	20,720		Unearned Revenue (25 units)	$	5,050
Accounts Receivable	$	11,750		Accounts Payable (Jan Rent)	$	2,700
Allowance for Doubtful Accounts	$	(1,600)		Notes Payable	$	13,000
Inventory (30 units)	$	2,550		Contributed Capital	$	6,400
				Retained Earnings – Feb 1, 2012	$	6,270

•	WWC establishes a policy that it will sell inventory at $170per unit.
•	In January, WWC received a $5,050 advance for 25 units, asreflected in Unearned Revenue.
•	WWC’s February 1 inventory balance consisted of 30 units at atotal cost of $2,550.
•	WWC’s note payable accrues interest at a 12% annual rate.
•	WWC will use the FIFO inventory method and record COGS on aperpetual basis.

February Transactions
02/01	Included in WWC’s February 1 Accounts Receivable balance is a$2,000 account due from Kit Kat, a WWC customer. Kit Kat is havingcash flow problems and cannot pay its balance at this time. WWCarranges with Kit Kat to convert the $2,000 balance to a note, andKit Kat signs a 6-month note, at 12% annual interest. The principaland all interest will be due and payable to WWC on August 1,2012.
02/02	WWC paid a $750 insurance premium covering the month ofFebruary. The amount paid is recorded directly as an expense.
02/05	An additional 180 units of inventory are purchased on account byWWC for $13,500 – terms 2/15, n30.
02/05	WWC paid Federal Express $360 to have the 180 units of inventorydelivered overnight. Delivery occurred on 02/06.
02/10	Sales of 150 units of inventory occurred during the period of02/07 – 02/10. The sales terms are 2/10, net 30.
02/15	The 25 units that were paid for in advance and recorded inJanuary are delivered to the customer.
02/15	20 units of the inventory that had been sold on 2/10 arereturned to WWC. The units are not damaged and can be resold.Therefore, they are returned to inventory. Assume the unitsreturned are from the 2/05 purchase.
02/16	WWC pays the first 2 weeks wages to the employees. The totalpaid is $2,200.
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 asa reduction of inventory costs.
02/18	Wrote off a customer’s account in the amount of $1,700.
02/19	$5,400 of rent for January and February was paid. Because all ofthe rent will soon expire, the February portion of the payment ischarged directly to expense.
02/19	Collected $9,400 of customers’ Accounts Receivable. Of the$9,400, the discount was taken by customers on $6,000 of accountbalances; therefore WWC received less than $9,400.
02/26	WWC recovered $540 cash from the customer whose account hadpreviously been written off (see 02/18).
02/27	A $650 utility bill for February arrived. It is due on March 15and will be paid then.
02/28	WWC declared and paid a $850 cash dividend.

Adjusting Entries:

02/29	Record the $2,200 employee salary that is owed but will be paidMarch 1.
02/29	WWC decides to use the aging method to estimate uncollectibleaccounts. WWC determines 8% of the ending balance is theappropriate end of February estimate of uncollectible accounts.
02/29	Record February interest expense accrued on the notepayable.
02/29	Record one month’s interest earned Kit Kat’s note (see02/01).

1-b.	Post all February entries (transactions and adjustments) to theT-accounts.