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 $3,600 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,120 are available at year-end.
3. Annual depreciation on the equipment is $14,400.
4. Annual depreciation on the professional library is $7,200.
5. On September 1, WTI agreed to do five courses for a client for $2,700 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 $13,500 cash in advance for all five courses on September 1, and WTI credited Unearned Revenue.
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, $10,950 of the tuition revenue 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	$	26,944
Accounts receivable		0
Teaching supplies		10,362
Prepaid insurance		15,545
Prepaid rent		2,073
Professional library		31,088
Accumulated depreciation—Professional library				$	9,328
Equipment		104,000
Accumulated depreciation—Equipment					16,582
Accounts payable					24,000
Salaries payable					0
Unearned revenue					13,500
Common stock					32,577
Retained earnings					76,000
Dividends		41,452
Tuition revenue					105,701
Training revenue					39,379
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		49,743
Insurance expense		0
Rent expense		22,803
Teaching supplies expense		0
Advertising expense		7,254
Utilities expense		5,803
Totals	$	317,067		$	317,067

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 $76,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.

PLEASE

Answer 1

Adjustment Entries as of December 31:

Account Name	Dr	Cr
Insurance Expense A/c	$       3,600
To Prepaid Insurance A/c		$    3,600
(Being expired insurance policies recognized)
Depreciation Expense A/c	$     21,600
To Accumulated Depreciation - Equipment A/c		$ 14,400
To Accumulated Depreciation - Professional Library A/c		$    7,200
(Being depreciation recognized)
Unearned Revenue A/c	$       5,400
To Training Revenue A/c		$    5,400
(Being revenue recongnized for the finished/completd two courses)
Accrued Revenue A/c	$     10,950
To Tuition Revenue A/c		$ 10,950
(Being accrued revenue recongnized in repect of the four month class)
Salaries Expense A/c	$           400
To Accured Salaries A/c		$        400
(Being accured salaries recognized for two days period)
Rent Expense A/c	$       2,073
To Prepaid Rent A/c		$    2,073
(Being rental expense recognized for the December month)

Income Statement for the year

Particulars	Note	Amount
Revenue	1	$          1,61,430
Expenses	2	$          1,20,518
Profit for the year	(1-2)	$             40,912

Balance Sheet as of December 31

Particulars	Note	Amount
I. Assets
Current Assets
a) Cash in Hand		$             26,944
b) Accrued Revenue		$             10,950
c) Inventories (Teaching Supplies)		$                3,120
d) Prepaid Insurance		$             11,945
Total Current Assets		$             52,959
Non-Current Assets
a) Equipment	3	$             73,018
b) Professional Library	4	$             14,560
Total Non-Current Assets		$             87,578
Total Assets		$          1,40,537
II. Liabilities and Equity
Current Liabilites
a) Accured Salaries		$                   400
b) Unearned Revenue (13500-5400)		$                8,100
b) Accounts Payable		$             24,000
Total Current Liabilities		$             32,500
Non-Current Liabilites		$                       -
Shareholders' Equity
a) Common Stock		$             32,577
b) Retained Earnings	5	$             75,460
Total Shareholders' Equity		$          1,08,037
Total Liabilites and Equity		$          1,40,537
Notes:
1. Revenue
Particulars	Amount
Training Revenue (39379+5400)	$           44,779
Tuition Revenue (105701+10950)	$       1,16,651
	$       1,61,430
2. Expenses
Particulars	Amount	Amount
Teaching Supplies Expense		$                7,242
Insurance Expense		$                3,600
Salaries Expense (49473+400)		$             50,143
Rent Expense (22803+2073)		$             24,876
Advertising Expense		$                7,254
Utilities Expense		$                5,803
Depreciation:
Equipment	$           14,400
Professional Library	$             7,200	$             21,600
		$          1,20,518
3. Equipment
Particulars	Amount
Opening WDV	1,04,000.00
Accumulated Depreciation - Equipment (16582+14400)	30,982.00
Closing WDV	73,018.00
4. Professional Library
Particulars	Amount
Opening WDV	31,088.00
Accumulated Depreciation - Professional Library (9328+7200)	16,528.00
Closing WDV	14,560.00
5. Retained Earnings
Particulars	Amount
Opening Balance	$           76,000
Less: Dividends	$           41,452
Add: Profit for the year	$           40,912
	$           75,460