Question

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO P1, P2, P3 The following information applies to the questions displayed below.) 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 a. An analysis of WTI's Insurance policies shows that $3,864 of coverage has expired. b. An Inventory count shows that teaching supplies costing $3,349 are available at year-end 2018. c. Annual depreciation on the equipment is $15,458. d. Annual depreciation on the professional library is $7,729. o a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,300, and the client paid the first five months' fees in advance. When the cash was received, 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 $5,300 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

Adjusting Entries: ACCOUNT TITLES EVENT DATE DEBIT CREDIT Insurance Expense $3,864 a) Dec. 31 Prepaid Insurance Teaching Supplies Expense Teaching Supplies Depreciation Expense - Equipment Accumulative Depreciation - Equipment $3,864 [$10420 - $3349] $7,071 b) Dec. 31 $7,071 $15,458 c) Dec. 31 $15,458 Depreciation Expense - Professional Library Accumulative Depreciation - Professional Library Unearned Training Fee $7,729 d) Dec. 31 $7,729 [$2,300 x 2 months] |(For Nov. & Dec., it is earned) [$5,300 x 2.5 months] |(For Oct 15 thru Dec. 31, it is earned) [2 exployees x 2 days x $100] $4,600 e) Dec. 31 Training Fees Earned Accounts Receivable $4,600 $13,250 f) Dec. 31 $13,250 Tuition Fees Earned Salaries Expense Salaries Payable $400 g) Dec. 31 $400 Rent Expense $2,085 h) Dec. 31 $2,085 Prepaid Rent

Professional Library Salaries Payable Cash $27,094 $27,094 $31,262 $31,262 Unadj. bal. g) |Adj. bal. $0 $400 Unadj. bal. Unadj. bal. Adj. bal. Adj. bal. $400 Accounts Receivable Accumulated Depreciation - Professional Library Unadj. bal. d) Adj. bal. Unearned Training Fee Unadj. bal. f) $0 $9,380 $7,729 $17,109 $4,600 Unadj. bal. |Adj. bal. $13,250 $13,250 $11,500 $6,900 e) Adj. bal. Teaching Supplies $10,420 b) $3,349 Common Stock Equipment Unadj. bal. Adj. bal. Unadj. bal. Adj. bal. Unadj. bal. Adj. bal. $7,071 $72,935 $72,935 $11,000 $11,000 Accumulated Depreciation - Equipment Dividends Unadj. bal. |c) Adj. bal. Unadj. bal. Adj. bal. $41,684 $41,684 $16,675 $15,458 $32,133 Perpaid Insurance $15,632 a) $11,768 $3,864 Unadj. bal. Adj. bal. Retained Earnings |Unadj. bal. |Adj. bal. Accounts Payable Perpaid Rent $2,085 h) $0 $55,277 $55,277 Unadj. bal. Adj. bal. Unadj. bal. Adj. bal. $2,085 $37,476 $37,476

Tution Fees Earned Teaching Supplies Expense Unadj. ba $106,293 f) Adj. bal. $119,543 Unadj. bal b) $0 $7,071 $7,071 $13,250 Adj. bal. Rent expense Training Fees Earned Unadj. bal $22,935 $2,085 $25,020 Unadj. ba $39,599 $4,600 $44,199 e) h) Adj. bal. Adj. bal. Depreciation Expense - Prof. Library Advertising Expense $7,295 $7,295 $0 Unadj. bal Unadj. bal. $7,729 d) Adj. bal. Adj. bal. $7,729 Utilities Expense $5,836 $5,836 Unadj. bal Adj. bal. Depreciation Expense - Equipment Unadj. bal. c) $0 $15,458 $15,458 Insurance expense Adj. bal. Unadj. bal a) Adj. bal. $0 $3,864 $3,864 Salaries Expense $50,022 $400 $50,422| Unadj. bal. g) Adj. bal.

WELLS TECHNICAL INSTITUTE Adjusted Trial Balance December 31, 2018 WELLS TECHNICAL INSTITUTE Income Statement ACCOUNT TITLES Cash Accounts Receivable DEBIT $27,094 $13,250 $3,349 $11,768 $31,262 CREDIT For the Year Ended December 31, 2018 Revenues: Tution Fees Earned $119,543 $44,199 Teaching Supplies Perpaid Insurance Professional Library Accumulated Depreciation - Professional Library Equipment Accumulated Depreciation - Equipment Accounts Payable Salaries Payable Unearned Training Fee Common Stock Retained Earnings Dividends Tution Fees Earned Training Fees Earned Total Revenues Expenses: Depreciation Expense - Prof. Library Depreciation Expense - Equipment Salaries Expense Insurance expense Rent expense $163,742 $17,109 $7,729 $15,458 $50,422 $3,864 $25,020 $7,071 $7,295 $5,836 $72,935 $32,133 $37,476 $400 $6,900 $11,000 $55,277 Teaching Supplies Expense Advertising Expense Utilities Expense Total Expenses $41,684 $122,695 $41,047 $119,543 $44,199 Net Income Training Fees Earned Depreciation Expense - Prof. Library Depreciation Expense - Equipment Salaries Expense $7,729 $15,458 $50,422 $3,864 $25,020 $7,071 $7,295 $5,836 $324,037 WELLS TECHNICAL INSTITUTE Statement of Retained Earnings For the Year Ended December 31, 2018 Insurance expense $55,277 Retained Earnings - Beginning Balance Add: Net Income Less: Dividends Net increase in retained earnings Retained Earnings - Ending Balance Rent expense Teaching Supplies Expense Advertising Expense Utilities Expense TOTALS $41,047 -$41,684 [Ref: Income Statement] -$637 $54,640 $324,037

WELLS TECHNICAL INSTITUTE Balance Sheet December 31, 2018 Liabilities & Shareholders' Equity Assets Current Liabilities: Current Assets: $27,094 Accounts Payable Salaries Payable $37,476 $400 Cash $13,250 $3,349 $11,768 Accounts Receivable Unearned Training Fee $6,900 Teaching Supplies Perpaid Insurance $44,776 Total Liabilities $55,461 Total Current Assets Shareholders' Equity: Property, Plant and Equipment: Professional Library $31,262 -$17,109 $72,935 -$32,133 $11,000 Common Stock Retained Earnings $14,153 $54,640 Accumulated Depreciation - Professional Library Shareholders' Equity $65,640 Equipment Accumulated Depreciation - Equipment $40,802 $54,955 $110,416 Property, Plant and Equipment, Net $110,416 Total Assets Total Liabilities & Shareholders' equity