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, 2015, 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, 2015, follow. Additional Information Items a. An analysis of WTI's insurance policies shows that $2,400 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,800 are available at year- end 2015. c. Annual depreciation on the equipment is $13,200. d. Annual depreciation on the professional library is $7,200. 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 $2,500, 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 2016. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 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:

Transaction	General Journal	Debit	Credit
a	Insurance expense	$2,400
	Prepaid insurance		$2,400
	[To record insurance expense]
b	Teaching Supplies expense [8,000-2,800]	$5,200
	Teaching Supplies		$5,200
	[To record supplies expense]
c	Depreciation expense-Equipment	$13,200
	Accumulated depreciation-Equipment		$13,200
	[To record depreciation expense on equipment]
d	Depreciation expense-professional library	$7,200
	Accumulated depreciation-professional library		$7,200
	[To record depreciation expense on professional library]
e	Unearned training fees	$5,000
	Training fees [$2,500 x 2 months]		$5,000
	[To record fees earned from unearned]
f	Accounts receivable	$7,500
	Tuition fees earned [$3,000 x 2.5 months]		$7,500
	[To record accrued tuition fees earned]
g	Salaries expense [$100 x 2 days x 2 employees]	$400
	Salaries payable		$400
	[To record accrued salaries]
h	Rent Expense	$3,000
	Prepaid rent		$3,000
	[To record rent expense]