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 follows, along with descriptions of items a through h that require adjusting entries on December 31. Additional Information 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. C. Annual depreciation on the equipment is $13,200. d. Annual depreciation on the professional library is $7,200. e. 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. f. 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. 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

1&3) Unadj. bal. Adj. bal. Cash $34,000 $34,000 Unadj. bal. Adj. bal. Professional Library $35,000 $35,000 Salaries Payable Unadj. bal. 8) Adj. bal. $0 $400 $400 Unadj. bal. a) Adj. bal. Accounts Receivable $0 $7,500 $7,500 Accumulated Depreciation - Professional Library Unadj. bal. $10,000 d) $7,200 Adj. bal. $17,200 e) Unearned Training Fees $5,000 Unadj. bal. $12,500 Adj. bal. $7,500 Teaching Supplies $8,000 b) $2,800 Unadj. bal. Adj. bal. $5,200 Unadj. bal. Adj. bal. Equipment $80,000 $80,000 Common Stock Unadj. bal. Adj. bal. $10,000 $10,000 Accumulated Depreciation - Equipment Unadj. bal. $15,000 C) $13,200 Adj. bal. $28,200 Prepaid Insurance $12,000 a) $9,600 Retained Earnings Unadj. bal. Adj. bal. $80,000 $80,000 Unadj. bal. Adj. bal. $2,400 Prepaid Rent $3,000 h) $0 Unadj. bal. Adj. bal. Dividends $50,000 $50,000 Accounts Payable Unadj. bal. Adj. bal. Unadj. bal. Adj. bal. $3,000 $26,000 $26,000

Tution Fees Earned Unadj. bal. $123,900 a) $7,500 Adj. bal. $131,400 Unadj. bal. b) Adj. bal. Teaching Supplies Expense $0 $5,200 $5,200 Training Fees Earned Unadj. bal. $40,000 e) $5,000 Adj. bal. $45,000 Unadj. bal. h) Adj. bal. Rent expense $33,000 $3,000 $36,000 Depreciation Expense - Prof. Library Unadj. bal. $0 d) $7,200 Adi. bal. $7,200 Unadj. bal. Adj. bal. Advertising Expense $6,000 $6,000 Unadj. bal. Adj. bal. Utilities Expense $6,400 $6,400 Depreciation Expense - Equipment Unadj. bal. $0 c) $13,200 Adj. bal. $13,200 Unadi. bal. a) Adj. bal. Insurance expense SO $2,400 $2,400 Unadj. bal. Salaries Expense $50,000 $400 $50,400 Adj. bal.

2) Adjusting Entries: CREDIT EVENT a) DATE Dec. 31 DEBIT $2,400 $2,400 b) Dec. 31 $5,200 [$8000 - $2800] $5,200 c) Dec. 31 $13,200 $13,200 d) Dec. 31 $7,200 ACCOUNT TITLES Insurance Expense Prepaid Insurance Teaching Supplies Expense Teaching Supplies Depreciation Expense - Equipment Accumulative Depreciation - Equipment Depreciation Expense - Prof. Library Accumulative Depreciation - Prof. Library Unearned Revenue Training Revenue Accounts Receivable Tuition Revenue Salaries Expense Salaries Payable Rent Expense Prepaid Rent $7,200 e) Dec. 31 $5,000 [$2500 x 2 courses] $5,000 a) Dec. 31 $7,500 [Given] $7,500 Dec. 31 $400 [2 employees x 2 days x $100] $400 h) Dec. 31 $3,000 $3,000

4A) CREDIT DEBIT $34,000 $7,500 $2,800 $9,600 $35,000 $176,400 WELLS TECHNICAL INSTITUTE Income Statement For the Year Ended December 31 Revenues: Tution Fees Earned $131,400 Training Fees Earned $45,000 Total Revenues Expenses: Depreciation Expense - Prof. Lib $7,200 Depreciation Expense - Equipme $13,200 Salaries Expense $50,400 Insurance expense $2,400 Rent expense $36,000 Teaching Supplies Expense $5,200 Advertising Expense $6,000 Utilities Expense $6,400 Total Expenses Net Income $17,200 WELLS TECHNICAL INSTITUTE Adjusted Trial Balance December 31 ACCOUNT TITLES Cash Accounts Receivable Teaching Supplies Perpaid Insurance Professional Library Accumulated Depreciation - Professional Library Equipment Accumulated Depreciation - Equipment Accounts Payable Salaries Payable Unearned Training Fees Common Stock Retained Earnings Dividends Tution Fees Earned Training Fees Earned Depreciation Expense - Prof. Library Depreciation Expense - Equipment Salaries Expense Insurance expense Rent expense Teaching Supplies Expense Advertising Expense Utilities Expense TOTALS $80,000 $28,200 $26,000 $400 $7,500 $10,000 $80,000 $126,800 $49,600 $50,000 $131,400 $45,000 3B) WELLS TECHNICAL INSTITUTE Statement of Retained Earnings For the Year Ended December 31 Retained Earnings - Beginning Balance Add: Net Income $49,600 Less: Dividends -$50,000 Net increase in retained earnings Retained Earnings - Ending Balance $7,200 $13,200 $50,400 $2,400 $36,000 $5,200 $6,000 $6,400 $345,700 $80,000 [Ref: Income Statement] -$400 $79,600 $345,700

4C) Assets Current Assets: Cash Accounts Receivable Teaching Supplies Perpaid Insurance Total Current Assets Property, Plant and Equipment: Professional Library Accumulated Depreciation - Professional Library Equipment Accumulated Depreciation - Equipment Property, Plant and Equipment, Net Total Assets WELLS TECHNICAL INSTITUTE Balance Sheet December 31 Liabilities & Shareholders' Equity Current Liabilities: $34,000 Accounts Payable $26,000 $7,500 Salaries Payable $400 $2,800 Unearned Training Fees $7,500 $9,600 Total Liabilities $53,900 Shareholders' Equity: $35,000 Common Stock $10,000 -$17,200 $17,800 Retained Earnings $79,600 $80,000 Shareholders' Equity $28,200 $51,800 $69,600 $123,500 Total Liabilities & Shareholders' equity $33,900 $89,600 $123,500