Question

Required information [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. lts 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 $3,468 of coverage has expired b. An inventory count shows that teaching supplies costing $3,006 are available at year-end 2018 c. Annual depreciation on the equipment is $13,871 d. Annual depreciation on the professional library is $6,936 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 $2,800, 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 $4,019 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, wTl'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. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2018 Debit Credit Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library Accumulated depreciation-Professional library Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retained earnings, December 31, 2017 Dividends Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals $ 27,396 10,536 15,806 2,108 31,610 $ 9,484 73,751 16,861 35,522 14,000 12,000 55,016 42,149 107,477 40,040 0 50,579 23,188 0 7,376 5,901 $290,400 $290,400

Answer 1

Question 1

WELLS TECHNICAL INSTITUTE
Income Statement
For Year Ended Dec 31, 2018
Particulars		Amount
Revenue from Operations
Revenue from tuition fees	$ 1,07,477
Add: Income accrued (4019*1.5 months)	$       6,029	$ 1,13,506
Revenue from training fees	$    40,040
Add: Unearned Training Fees (14000*2/5)	$       5,600	$     45,640
Total Revenue from operations		$ 1,59,146
Expenses
Salary expense	$    50,579
Add: Salary Outstanding	$          400	$     50,979
Change in Inventory (10536-3006)		$       7,530
Insurance Expense		$       3,468
Depreciation (13871+6936)		$     20,807
Rent Expense	$    23,188
Add: Prepaid Rent	$       2,108	$     25,296
Teaching supplies expense		$                -
Advertising expense		$       7,376
Utilities Expense		$       5,901
Total Expenses		$ 1,21,357
Net Profit / Loss		$     37,789

Notes:

1. Changes in Inventory = Opening Inventory - Closing Inventory

Question 2

WELLS TECHNICAL INSTITUTE
Statement of Retained Earnings
For Year Ended Dec 31, 2018
Particulars		Amount
Retained Earnings, December 31, 2017		$     55,016
Add: Net Profit /(Loss)	$ 37,789
Less: Dividend Declared	-$ 42,149
Retained Earnings, December 31, 2018		$     50,656

Question 3

WELLS TECHNICAL INSTITUTE
Balance Sheet
For Year Ended Dec 31, 2018
Particulars		Amount
Liabilities
Equity
Common Stock		$     12,000
Retained Earnings		$     50,656
Unearned training fees (14000-(14000*2/5)		$       8,400
Accounts Payable		$     35,522
Salaries Payable		$          400
TOTAL		$ 1,06,978
Assets
Fixed Assets
Professional Library	$ 31,610
Less: Accumulated Depreciation (9484+6936)	$ 16,420	$     15,190
Equipment	$ 73,751
Less: Accumulated Depreciation (16861+13871)	$ 30,732	$     43,019
Current Assets
Income Accrued		$       6,029
Prepaid Insurance	$ 15,806
Less: Expired Coverage	$    3,468	$     12,338
Closing Inventory		$       3,006
Accounts Receivables		$                -
Cash and Cash Equivalents		$     27,396
TOTAL		$ 1,06,978

Notes:

1. It is assumed that the dividend shown in the trial balance is dividend paid, so it is transferred and adjusted with the retained earnings.

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