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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. 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 $4,129 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,578 are available at year-end.
3. Annual depreciation on the equipment is $16,515.
4. Annual depreciation on the professional library is $8,258.
5. On September 1, WTI agreed to do five courses for a client for $2,200 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 $11,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
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, $14,800 of the tuition 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	$	28,000
Accounts receivable		0
Teaching supplies		10,768
Prepaid insurance		16,155
Prepaid rent		2,155
Professional library		32,307
Accumulated depreciation—Professional library				$	9,693
Equipment		98,000
Accumulated depreciation—Equipment					17,232
Accounts payable					22,000
Salaries payable					0
Unearned training fees					11,000
Common stock					23,738
Retained earnings					85,000
Dividends		43,078
Tuition fees earned					109,846
Training fees earned					40,923
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,694
Insurance expense		0
Rent expense		23,705
Teaching supplies expense		0
Advertising expense		7,539
Utilities expense		6,031
Totals	$	319,432		$	319,432

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 $85,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.

Answer 1

124,646 45,323 169,969 Wells Technical Institute Income Statement For Year Ended December 31 Revenues Tuition fees eanred Training fees eanred Total Revenues Expenses Depreciation expense- Prof Library Depreciation expense- Equipment Salaries expense Insurance expense Rent expense Teaching Supplies expense Advertising expense Utilities expense Total Expenses Net Income 8,258 16,515 52,094 4,129 25,860 7,190 7,539 6,031 127,616 42,353 Statement of Retained Earnings For Year Ended December 31 Retained Earnings, Dec 31, prior year Add: Net Income 85,000 42,353 127,353 (43,078) 84,275 Less: Dividends Retained Earnings, Dec 31, current year

Wells Technical Institute Balance Sheet As of December 31 Assets Current Assets Cash Accounts Receivable Teaching Supplies Prepaid Insurance Prepaid Rent Total Current Assets 28,000 14,800 3,578 12,026 58,404 32,307 (17,951) 14,356 Fixed Assets Professional Library Accumulated Depreciation Professional Library Professional Library, Net Equipment Accumulated Depreciation Equipment Equipment, Net Net Fixed Assets Total Assets 98,000 (33,747) 64.253 78,609 137,013 22,000 Liabilities & Equity Current Liabilities Accounts Payable Salaries Payable Unearned Training Fees Total Current Liabilities 400 6,600 29,000 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Equity 23,738 84,275 108,013 137,013

WTI Wells Technical Institute Journal entries No. Account a Insurance expense Prepaid Insurance Credit Calculation Debit $ 4,129 $ 4,129 b $ 7,190 =10,768-3,578 Teaching Supplies expense Teaching Supplies $ 7,190 с $ 16,515 Depreciation expense-Equipment Accumulated Depreciation Equipment $ 16,515 d $ 8,258 Depreciation expense- Prof Library Accumulated Depreciation-Professional Library $ 8,258 $ 4,400 =2,200*2 Unearned Training Fees Training fees eanred $ 4,400 $ 14,800 Accounts Receivable Tuition fees eanred $ 14,800 g $ 400 = 100*2*2 Salaries expense Salaries Payable $ 400 $ 2,155 Rent expense Prepaid Rent $ 2,155

Wells Technical Institute T Accounts Date Debit Date Cash Unadj Bal $ 28,000 DEN Credit Credit Date Debit Date Equipment Unadj Bal $ 98,000 Adj Bal $ 28,000 Accounts Receivable Unadj Bal $ - 31-Dec $ 14,800 Adj Bal $ 98,000 Accum. Depr. - Equipment Unadj Bal $ 17,232 31-Dec $ 16,515 Adj Bal $ 14,800 Teaching Supplies $ 10,768 31-Dec $ Adj Bal $ 33,747 Accounts Payable Unadj Bal $ 22,000 Unadj Bal 7,190 Adj Bal $ 3,578 Prepaid Insurance $ 16,155 31-Dec $ Adj Bal $ 22,000 Salaries Payable Unadj Bal $ - 31-Dec $ 400 Unadj Bal 4,129 Adj Bal $ 12,026 Prepaid Rent 2,155 31-Dec $ Adj Bal $ 400 Unearned Training Fees Unadj Bal $11,000 31-Dec $ 4,400 Unadj Bal $ 2,155 Adj Bal $ - Professional Library $32,307 Adj Bal $ 6,600 Common Stock Unadj Bal $ 23,738 Unadj Bal $ 23,738 Adj Bal $ 32,307 Adj Bal Accum. Depr. - Professional Library Dividends Unadj Bal $ 9,693 Unadj Bal $ 43,078 31-Dec $ 8,258 Adj Bal $ 17,951 Adj Bal Tuition fees earned Unadj Bal $ 109,846 31-Dec $ 14,800 $ 43,078 Retained Earnings Unadj Bal $ 85,000 $ 85,000 Adj Bal $ 124,646 Training fees earned Unadj Bal $ 40,923 31-Dec $ 4,400 Adj Bal Rent expense Unadj Bal $ 23,705 31-Dec $ 2,155 Adj Bal $ 45,323 Depreciation expense-Professional Library Unadj Bal $ - 31-Dec $ 8,258 Adj Bal $ 25,860 Teaching Supplies expense Unadj Bal $ 31-Dec $ 7,190 Adj Bal $ 8,258 Depreciation expense-Equipment Unadj Bal $ 31-Dec $ 16,515 Adj Bal $ 7,190 Advertising expense Unadj Bal $ 7,539 Adj Bal $ 16,515 Salaries expense Unadj Bal $ 51,694 31-Dec $ 400 Adj Bal $ 7,539 Utilities expense Unadj Bal $ 6,031 Adj Bal $ 6,031 Adj Bal $ 52,094 Insurance expense Unadj Bal $ . 31-Dec $ 4,129 Adj Bal $ 4,129

Adjusted TB Debit Credit 28,000 14,800 3,578 12,026 32,307 17,951 98,000 33,747 Wells Technical Institute Account Names 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 Dividends Tuition fees eanred Training fees eanred Depreciation expense- Prof Library Depreciation expense- Equipment Salaries expense Insurance expense Rent expense Teaching Supplies expense Advertising expense Utilities expense Totals 22,000 400 6,600 23,738 85,000 43,078 124,646 45,323 8,258 16,515 52,094 4,129 25,860 7,190 7,539 6,031 359,405 359,405