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. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Its unadjusted trial balance as of December 31 follows along with descriptions of items a through h that require adjusting entries on December 31.

Additional Information Items

1. An analysis of WTI's insurance policies shows that $2,939 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,547 are available at year-end.
3. Annual depreciation on the equipment is $11,756.
4. Annual depreciation on the professional library is $5,878.
5. On September 1, WTI agreed to do five courses for a client for $2,800 each. Two courses will start immediately and finish before the end of the year. Three courses will not begin until next year. The client paid $14,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $7,450 of the tuition has been earned by WTI.
7. 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.
8. The balance in the Prepaid Rent account represents rent for December.
   

WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31
	Debit			Credit
Cash	$	27,698
Accounts receivable		0
Teaching supplies		10,652
Prepaid insurance		15,981
Prepaid rent		2,132
Professional library		31,958
Accumulated depreciation—Professional library				$	9,589
Equipment		97,000
Accumulated depreciation—Equipment					17,046
Accounts payable					26,000
Salaries payable					0
Unearned training fees					14,000
Common stock					23,267
Retained earnings					77,000
Dividends		42,613
Tuition fees earned					108,661
Training fees earned					40,482
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,136
Insurance expense		0
Rent expense		23,452
Teaching supplies expense		0
Advertising expense		7,457
Utilities expense		5,966
Totals	$	316,045		$	316,045

Required:
1. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end.

2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
2-b. Prepare an adjusted trial balance.

3-a. Prepare Wells Technical Institute's income statement for the year.
3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $77,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.

Answer 1

A Adjusting Entries 1 Debit (S) Credit (S) Account Titles Date Insurance Expense $2,939 3 1 Prepaid Insurance (To record the insurance expired) Teaching Supplies Expense Teaching Supplies (To record the teaching supplies expense) Depreciation Expense - Equipment $2,939 4 5 $8,105 6 $8,105 7 $11,756 3 9 Accumulated Deprecaition Equipment $11,756 10 (To record the depreciation expense) Depreciation Expense Professional Liabrary 11 $5,878 4 12 Accumulated Deprecaition Professional Library $5,878 13 (To record the depreciation expense) Unearned Training Fees Training Fees Earned |(To record the training completed Accounts Receivable 14 $5,600 5 15 $5,600 16 17 $7,450 6 18 Tution Fees Eamed $7,450 19 (To record the tution fees earned) Salaries Expense 20 $200 21 7 22 Salaries Payable $200 (To record the salaries accrued) Rent Expense 23 $2,132 8 24 Prepaid Rent (To record the rent expense) $2,132 25 26 17 co LO LO co

G H K L M P Q R S Adjusted Post Closing Unadjustment Income Balance Trial Balance Trial Balance Adjustments Trial Balance Statement Sheet 2 Debit (S) Credit ($) Debit (S) Credit (S) Debit (S) Credit (S) Debit ($) Credit (S) Debit (S) Credit (S) Debit ($) Credit ($) Account Titles $27,698 $7,450 $27,698 $7,450 Cash $27,698 $0 $27,698 $7,450 $2,547 4 $7,450 Accounts Receivable 5 6 Teaching supplies 7 Prepaid Insurance 8 Prepaid Rent 9 Professional Library 10 Accumulated Deprecaition Professional Library 11 Equipment 12 Accumulated Deprecaition - Equipment $10,652 $8,105 $2,547 $2,547 $2,547 $13,434 $15.981 $13,434 $13,434 $0 $2,132 $0 $0 $2,132 $31,958 $31,958 $31.958 $31,958 $15,467 $5,878 $15,467 $9,589 $15,467 $97,000 $97,000 $97,000 $97,000 $28,802 $26,000 $17,046 $28,802 $11,756 $28,802 $26,000 $26,000 $26,000 13 Accounts Payable 14 Salaries Payable $0 $200 $200 $200 $200 $14,000 $8,400 15 Unearned training fees $5,600 $8,400 $8,400 $23,267 $77,000 $23.267 $23.267 $23.267 16 Common stock $77,000 $77,000 17 Retained Earmings $77,951 $42,613 $42,613 $42,613 18 Dividends $7,450 $5,600 $108,661 $40.482 19 Tution fees earned $116,111 $46,082 $116,111 $46,082 20 Training fees eamed $5,878 $11,756 $51,336 $2,547 $25,584 $8,105 $7,457 $5.878 $0 21 Depreciaiton Expense - Professional Library 22 Depreciaiton Expense - Equipment 23 Salaries Expense 24 Insurance Expense 25 Rent Epense $5,878 $11,756 $11,756 $51,336 $2,547 $25,584 $8,105 $51,136 $200 $0 $2,547 $2,132 $23,452 26 Teaching supplies expense 27 Advertis ing expense $0 $8,105 $7,457 $7,457 28 Utilities expense $5,966 $43,564 $5,966 $5,966 29 Net Income 30 Total $43,564 $316,045 $316,045 $43,668 $341,329 $341329 $180,087 $180,087 $162,193 $162,193 $222,700 $222,700 $43,668

G H K M Post Closing Unadjustment Adjusted 1 Trial Balance Adjustments Trial Balance Trial Balance Debit (S) Credit (S) Credit (S) Debit (S) Debit (S) - H4+ J4- K4 - H5+ 15 -KS H6+ J6- K6 H7+ J7 - K7 - H8 + J8 - K8 H9+ J9- K9 Debit (S) -L4 Account Titles Credit ($) Credit ($) 3 Cash 27698 0 Accounts Receivable =L5 7450 6 Teaching supplies =H6-2547 10652 -L6 15981 2132 31958 10 Accumulated Deprecaition Professional L 2547 2132 =L7 -LS 7 Prepaid Insurance 8 Prepaid Rent -L9 9 Professional Library 9589 - I 10+K10- J10 5878 -M10 - H11+ J11- K11 11 Equipment 97000 =L11 -M12 -M13 - I 12+ K12 - J 12 I 13+ K13 - J 13 - I14+K14 - J 14 - I15+ K15- 15 - I 16+ K16- J 16 - I 17+ K17- J 17 12 Accumulated Deprecaition Equipment 13 Accounts Payable 17046 11756 26000 14 Salaries Payable =M14 -M15 0 - 100 * 2 14000 -2800*2 15 Uneamed training fees M16 -M17+ SUM (M 19M20-SUML21128)-L18 23267 16 Common stock 17 Retained Eamings 77000 42613 - H18+ J 18 - K18 18 Dividends - I 19+ K19- J 19 - 120+K20- J20 108661 40482 7450 - 2800* 2 19 Tution fees eamed 20 Training fees earned 21 Depreciaiton Expense - Professional Library0 22 Depreciaiton Expense - Equipment 23 Salaries Expense 5878 - H21 + J21- K21 - H22+ J22- K22 =H23 + J23- K23 11756 51136 200 24 Insurance Expense 25 Rent Expense 26 Teaching supplies expense 27 Advertis ing expense 0 2547 =H24+J24 - K24 - H25+ J25-K25 - H26+ J26-K26 - H27+ 127 - K27 23452 2132 8105 0 7457 =H28 + J28 - K28 28 Utilities expense 5966 29 Net Income -SUM(H4H29)-SUM(I4129 -SUM(J4J29)SUM(K4K29)SUM(L4129 )SUM(M4M29- SUM(N4N29)-SUM(04:029) 30 Total Activate

G P S Income Balance Statement Sheet 2 Debit (S) Debit (S) -N4 Credit ($) Account Titles Credit (S) 4 Cash =N5 N6 Accounts Receivable 6 Teaching supplies 7 Prepaid Insurance 8 Prepaid Rent 9 Professional Library 10 Accumulated Deprecaition - Professional L 11 Equipment 12 Accumulated Deprecaition - Equipment 13 Accounts Payable 14 Salaries Payable -N7 EN8 =N9 -O10 =N11 -O12 -O13 -O14 -O15 15 Uneamed training fees -O16 16 Common stock =M17 17 Retained Eamings =L18 18 Dividends =M19 M20 19 Tution fees eamed 20 Training fees eamed 21 Depreciaiton Expense - Professional Library-L21 22 Depreciaiton Expense-Equipment 23 Salaries Expense 24 Insurance Expense 25 Rent Expense 26 Teaching supplies expense 27 Advertising expense L22 =L23 - L24 =L25 = L26 =L27 -L28 -SUM(Q19:020)-SUM(P21-P28) -SUM(P4P29) 28 Utilities expense -P29 29 Net Income - SUM (Q4:029 ) -SUM(R4R29) -SUM (S4: S29) 30 Total tLo.

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