Accounting

Name __________________________________________ ACC 2013.01S Summer 2010 Project 2 (15 pts) Review of the Merchandising Cycle

THIS PROJECT IS DUE MONDAY, JULY 26 @ 2:15 PM. NO EXCEPTIONS.

Introduction Jefferson Widget Company (JWC) incorporated near the end of 2009. Operations began in January of 2010. JWC prepares adjusting entries and financial statements at the end of each month. The statements report monthly results for the period February 1-29, 2010. Pertinent items of general information: Beginning Balances from 1/31/10: Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (30 units)

$33,620 $9,510 $700 $2,730

Unearned Revenue (30 units) Accounts Payable (Jan Rent) Notes Payable Contributed Capital Retained Earnings

$6,000 $1,300 $18,000 $15,000 $4,860

JWC establishes a policy that it will sell inventory at $200 per unit. In January, JWC received a $6,000 advance for 30 units, as reflected in Unearned Revenue. JWC’s February 1 inventory balance consisted of 30 units at a total cost of $2,730. JWC’s note payable accrues interest at a 10% annual rate. JWC will use the FIFO inventory method and record COGS on a perpetual basis. February Transactions 02/01 Included in JWC’s February 1 Accounts Receivable balance is a $5,000 account due from Karlak, a JWC customer. Karlak is having cash flow problems and cannot pay its balance at this time. JWC arranges with Karlak to convert the $5,000 balance to a note, and Karlak signs a 6-month note, at 12% interest. The principal and all interest will be due and payable to JWC on August 1, 2010. 02/02 JWC paid a $600 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 JWC for $15,000 – terms 3/10, n30; FOB Destination. 02/10 Sales of 110 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30. 02/15 The advance order for 30 units from...