Question

Required information Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO P1, P2, P3, P4, P6 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. 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 a. An analysis of WTI's insurance policies shows that $3,071 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,662 are available at year-end. c. Annual depreciation on the equipment is $12,285. d. Annual depreciation on the professional library is $6,142. e. 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 Training Fees. 1. 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, $8,350 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

3-a)

WELLS TECHNICAL INSTITUTE
Income Statement
For the Year Ended December 31
Revenue:
Tuition fees earned	$118196
Training fees earned	46323
Total revenues		$164519
Expenses:
Depreciation expense—Professional library	6142
Depreciation expense—Equipment	12285
Salaries expense	52094
Insurance expense	3071
Rent expense	25860
Teaching supplies expense	8106
Advertising expense	7539
Utilities expense	6031
Total expenses		121128
Net income		$43391

Tuition fees earned= $109846+8350= $118196

Training fees earned= $40923+($2700*2)= $46323

Salary expense= $51694+($100*2*2)= $52094

Rent expense= $23705+2155= $25860

Teaching supplies expense= $0+8106= $8106

b.

WELLS TECHNICAL INSTITUTE
Statement of Owner's Equity
For the Year Ended December 31
T.Wells, Capital, December 31 prior year end	$68493
Add: Net income	43391
	111884
Less: Withdrawals	43078
T.Wells, Capital, December 31 current year end	$68806

c.

WELLS TECHNICAL INSTITUTE
Balance Sheet
December 31
ASSETS
Cash		$28000
Accounts receivable		8350
Teaching supplies		2662
Prepaid insurance		13084
Professional library	$32307
Less: Accumulated depreciation—Professional library	15835	16472
Equipment	$75368
Less: Accumulated depreciation—Equipment	29517	45851
Total assets		$114419
LIABILITIES
Accounts payable		$37113
Salaries payable		400
Unearned training fees		8100
Total liabilities		$45613
EQUITY
T.Wells, Capital		$68806
Total liabilities and equity		$114419

Accounts receivable= $0+8350= $8350

Prepaid insurance= $16155-3071= $13084

Accumulated depreciation—Professional library= $9693+6142= $15835

Accumulated depreciation—Equipment= $17232+12285= $29517

Salaries payable= $100*2*2= $400

Unearned training fees= $13500-($2700*2)= $8100