Question

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3

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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. Its unadjusted trial balance as of December 31, 2017, 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, 2017, follow.
  
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 2017.
3. Annual depreciation on the equipment is $13,200.
4. Annual depreciation on the professional library is $7,200.
5. 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 2018.
6. 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.)
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.
   2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
   2-b. Prepare an adjusted trial balance.

Answer 1

Adjusting Entries Date General Journal Debit Credit $2,400.00 Dec-31 |Insurance expense Prepaid Insurance 2,400.00 Dec-31 Teaching Supplies Expense 5,200.00 $5,200.00 Teaching Supplies ($8,000-$2,800) Dec-31 Depriciation Expnese-Equipment $ 13,200.00 Accumulated depriciaition-Equipment $ 13,200.00 Dec-31|Depriciation Expnese-Professional Liabrary $7,200.00 Accumulated depriciaition-Professional Liabrary 7,200.00 Dec-31 Unearned Training fees 5,000.00 $5,000.00 Training Fees earned ($3,000 * 2 months) Dec-31 Accounts Receivable $7,500.00 Tution fees earned $7,500.00 (3000* 50%+3000+3000) Dec-31 Salaries expense 400.00 400.00 Salaries Payable (2 employees* 2 days $100) Dec-31|Rent expense 3,000.00 Prepaid rent $3,000.00

Cash Equipment Unadj Ba 34,000.00 Unadj Ba 80,000.00 34,000.00 580,000.00 cconts Receivable Accumulated deprication-equipment Unadj Bal $ $7,500.00 $7,500.00 Unadj. Bal. 15,000.00 513,200.00 5 28,200.00 Adj bal Teaching Supplies Accounts Payable Unadj Bal 8,000.00 Unadj. Bal. 26,000.00 $5,200.00 di bal $2,800.00 5 26,000.00 Prepaid Insurance Salaries Payable Unadj Bal $12,000.00 Unadj. Bal. $ $2,400.00 400.00 Adj bal $ 9,600.00 400.00 Prepaid Rent Uneamed Training Fees Unadj Bal 3,000.00 Unadj. Bal 12,500.00 3,000.00 S5,000.00 57,500.00 Professional Liabrary Common stock Unadj Bal 35,000.00 Unadj. Bal. 10,000.00 $35,000.00 5 10,000.00 Accumulated deprication-Professional Liabrary Dividends Unadj. Bal. 10,000.00 $7,200.00 S17,200.00 Unadj Bal 50,000.00 5 50,000.00 Tution Fees Earned Insurance Expense Unadj. Bal. $ 123,900.00 $7,500.00 $131,400.00 2,400.00 Adj bal $ 2,400.00 Training Fees Earned Rent Expense Unadj. Bal. 40,000.00 $5,000.00 45,000.00 Unadj Bal 33,000.00 3,000.00 $36,000.00 Deprication Expense- equipment Deprication Expense- Professional Liabrary Unadj Bal $ $13,200.00 $13,200.00 57,200.00 5 7,200.00 Teaching Supplies Expense Advertising Expense Unadj Bal $ Unadj Bal 6,000.00 $5,200.00 $5,200.00 Adj bal Adj bal 56,000.00 Salaries Expense Utilities Expense Unadj Ba 50,000.00 400.00 S 50,400.00 Unadj Ba 6,400.00 Adj bal $6,400.00 retained earnings Unadj. Ba80,000.00 5 80,000.00

Unadiusted Trial Balance Adjustments Adiusted Trial Balance Debit Debit $34,000.00 Accounts Receivable Teaching Supplies Prepaid Insurance 34,000.00 7,500.00 2,800.00 9,600.00 7.500.00 5,200.00 $ 8,000.00 $12,000.00 $3,000.00 35,000.00 3,000.00$ Professional Liabrar Accumulated depriciation-Professional Libra Equipment Accumulated depriciation-Equipment Accounts Payable S 10,000.00 $7,200.00 17,200.00 $80,000.00 80,000.00 $15,000.00 $26,000.00 $13,200.00 28,200.00 26,000.00 Unearned Training Fees Common stock 12.500.00 S5,000.00 7,500.00 10,000.00 10,000.00 $50,000.00 0,000.00 80.000.00 5 123.900.00 $40,000.00 retained earnigns Tution fees earned Training fees earned Depriciation Expense-Professional Librar Depriciation Expense-Equipment Salaries Expense Insurance Expense Rent expense Teaching Supplies Expense Advertising Expense Utilities Expense 80,000.00 131,400.00 45,000.00 7,200.00 S 13,200.00 $400.00 $2,400.00 $3,000.00 5,200.00 7,200.00 13,200.00 50,400.00 2,400.00 36,000.00 5,200.00 6,000.00 6,400.00 $50,000.00 $33,000.00 6,000.00 $6,400.00 S 317,400.00 317.400.00 43,900.00S 43,900.00S345,700.00$345,700.00 Income statement $ 131,400.00 45,000.00 Tution fees earned Training fees earned total revenues 176400 Depriciation Expense-Professional Library Depriciation Expense-Equipment Salaries Expense Insurance Expense Rent expense Teaching Su Advertising Expense $7,200.00 $13,200.00 $50,400.00 $2,400.00 $36,000.00 $5,200.00 $6,000.00 640.00 total expenses 126800 net income 49600 St, of owners equit Retained earnings dec 2016 Net income $80,000.00 49600 129600 $50,000.00 79600 dividends Retained earnings dec 201

Balance sheet $34,000.00 $7,500.00 $2,800.00 $ 9,600.00 Cash Accounts Receivable Teaching Supplies Prepaid Insurance Prepaid rent Professional Liabrary Accumulated depriciation-Professional Library Equipment Accumulated depriciation-Equipment total assets $ 35,000.00 $ 17,200.00 $ 80,000.00 $ 28,200.00 17800 51800 123500 Liabilties Accounts Payable Salaries Payable Unearned Training Fees $26,000.00 400.00 $7,500.00 total liabilties $33,900.00 Equity Common stock Retained earnings total equity $10,000.00 79600 89600 total liabilties & equity $ 123,500.00