Question

Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as of December 31, 2018, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2018, follow. Additional Information Items o. An analysis of WTI's insurance policies shows that $3,468 of coverage has expired. b. An inventory count shows that teaching supplies costing $3,006 are available at year-end 2018 c. Annual depreciation on the equipment is $13,871 d. Annual depreciation on the professional library is $6,936. e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2.800, and the client paid the first five months' fees in advance. When the cash was recelved, the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2019. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,019 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) g. WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee h. The balance in the Prepaid Rent account represents rent for December

Answer 1

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Wells Technical Institute
Work Sheet	Unadjusted	Adjustments	Adjusted	Remarks
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit
Cash	28,000.00				28,000.00
Accounts Receivable			10,047.50		10,047.50		$ 4,019 per month. Receivable from 15th October i.e. 2.5 months till 31st December. So $ 4,019*2.5= $ 10,047.50.
Teaching Supplies	10,768.00			7,762.00	3,006.00		Supplies on hand at year-end, $3,006. So $ 10,768- $ 3,006= $ 7.7762 consumed.
Prepaid Insurance	16,155.00			3,468.00	12,687.00		$ 3,468 prepaid insurance is expired.
Prepaid Rent	2,155.00			2,155.00	-		Whole Prepaid Rent is for December.
Professional Library	32,307.00				32,307.00
Accumulated Depreciation- Professional Library		9,693.00		6,936.00		16,629.00	Depreciation on Professional Library is $ 6,936.
Equipment	75,368.00				75,368.00
Accumulated Depreciation- Equipment		17,232.00		13,781.00		31,013.00	Depreciation on equipment $ 13,781.
Accounts Payable		36,613.00				36,613.00
Salaries Payable				400.00		400.00	$ 100 payable each day for 2 employee i.e. $ 100*2days*2employees= $ 400.
Unearned Training Fees		14,000.00	5,600.00			8,400.00	Training fees earned at $ 2,800 per month from November to December i.e. $ 2,800*2= $ 5,600.
Common Stock		12,000.00				12,000.00
Retained Earnings		56,493.00				56,493.00
Dividends	43,078.00				43,078.00
Tuition Fees Earned		109,846.00		10,047.50		119,893.50	$ 4,019 per month. Receivable from 15th October i.e. 2.5 months till 31st December. So $ 4,019*2.5= $ 10,047.50.
Training Fees Earned		40,923.00		5,600.00		46,523.00	Training fees earned at $ 2,800 per month from November to December i.e. $ 2,800*2= $ 5,600.
Depreciation- Professional Library			6,936.00		6,936.00		Depreciation on Professional Library is $ 6,936.
Depreciation- Equipment			13,781.00		13,781.00		Depreciation on equipment $ 13,781.
Salaries Expense	51,694.00		400.00		52,094.00		$ 100 payable each day for 2 employee i.e. $ 100*2days*2employees= $ 400.
Insurance Expense			3,468.00		3,468.00		$ 3,468 prepaid insurance is expired.
Rent Expense	23,705.00		2,155.00		25,860.00		Whole Prepaid Rent is for December.
Teaching Supplies Expense			7,762.00		7,762.00		Supplies on hand at year-end, $3,006. So $ 10,768- $ 3,006= $ 7.7762 consumed.
Advertising Expense	7,539.00				7,539.00
Utilities Expense	6,031.00				6,031.00
Total	296,800.00	296,800.00	50,149.50	50,149.50	327,964.50	327,964.50

Answer 4-a
Income Statement	Amount $
Tuition Fees Earned	119,893.50
Training Fees Earned	46,523.00
Total Revenue	166,416.50
Less:
Depreciation- Professional Library	6,936.00
Depreciation- Equipment	13,781.00
Salaries Expense	52,094.00
Insurance Expense	3,468.00
Rent Expense	25,860.00
Teaching Supplies Expense	7,762.00
Advertising Expense	7,539.00
Utilities Expense	6,031.00
Total Expense	123,471.00
Net Operating Income	42,945.50
Answer 4-b
Statement of Retained Earnings
Retained Earnings- Opening Balance	56,493.00
Add: Net Income	42,945.50
Less: Dividends	43,078.00
Retained Earnings- Closing balance	56,360.50

Answer 4-c
Balance Sheet	Amount $	Amount $
Assets
Current Assets
Cash	28,000.00
Accounts Receivable	10,047.50
Teaching Supplies	3,006.00
Prepaid Insurance	12,687.00
Total Current Assets		53,740.50
Plant Property & Equipment
Professional Library	32,307.00
Accumulated Depreciation- Professional Library	(16,629.00)	15,678.00
Equipment	75,368.00
Accumulated Depreciation- Equipment	(31,013.00)	44,355.00
Total Plant Property & Equipment		60,033.00
Total Assets		113,773.50
Liabilities & Stockholder's Equity
Liabilities
Current Liabilities
Accounts Payable	36,613.00
Salaries Payable	400.00
Unearned Training Fees	8,400.00
Total Current Liabilities		45,413.00
Non Current Liabilities
Total Liabilities		45,413.00
Stockholder's Equity
Common Stock	12,000.00
Retained Earnings	56,360.50
Total Stockholder's Equity		68,360.50
Total Liabilities & Stockholder's Equity		113,773.50