Question

Required information

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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 $2,400 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,800 are available at year-end.
3. Annual depreciation on the equipment is $13,200.
4. Annual depreciation on the professional library is $7,200.
5. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 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, $7,500 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		$	34,000
Accounts receivable			0
Teaching supplies			8,000
Prepaid insurance			12,000
Prepaid rent			3,000
Professional library			35,000
Accumulated depreciation—Professional library							$	10,000
Equipment			80,000
Accumulated depreciation—Equipment								15,000
Accounts payable								26,000
Salaries payable								0
Unearned training fees								12,500
T. Wells, Capital								90,000
T. Wells, Withdrawals			50,000
Tuition fees earned								123,900
Training fees earned								40,000
Depreciation expense—Professional library			0
Depreciation expense—Equipment			0
Salaries expense			50,000
Insurance expense			0
Rent expense			33,000
Teaching supplies expense			0
Advertising expense			6,000
Utilities expense			6,400
Totals		$	317,400				$	317,400

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

Answer 1

Wells Technical Institute (WTI) Adjusting Enteries Date Particulars 31.12.2018 Insurance Expense a/c To Prepaid Insurance (Insurance expensed) Dr. Debit in $Credit in $ 2400 2400 Debit in $ Credit in $ 34000 7500 2800 9600 Dr. 5200 31.12.2018 Teaching supplies expense a/c To Supplies (Supplies expensed) 8000 - 2800 5200 35000 17200 13200 80000 31.12.2018 Depreciation expense-Equipment a/c Dr. To Accumulated depreciation-Equipment (To record depreciation) 13200 a 28200 26000 400 7500 90000 7200 Adjusted Trial Balance For the period ending 31.12.2018 Particulars Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library Accumulated depreciation Professional library Equipment Accumulated depreciation Equipment Accounts payable Salaries payable Unearned training fees T.Wells, Capital Retained Earnings T.Wells, Withdrawals Tuition fees earned Training fees earned Depreciation expense- Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals 31.12.2018 Depreciation expense-Professional library a/c Dr. | To Accumulated depreciation-Professional library (To record depreciation) T 7200 50000 Dr. 5000 31.12.2018 Unearned Training Fees a/c To Training fees earned (Revenue recognized) 2500 x 2 131400 45000 5000 Dr. 7500 31.12.2018 Accounts receivable a/c To Tuition fees earned (Revenue accrued) 7500 7200 13200 50400 2400 36000 5200 6000 6400 345700 400 31.12.2018 Salaries expense a/c To Salaries payable (Salary expense accrued) 2 x 2 x 100 = 400 400 345700 3000 31.12.2018 Rent Expense a/c To Prepaid Rent (Rent expensed) 3000