Question

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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 $2,807 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,433 are available at year-end.
3. Annual depreciation on the equipment is $11,227.
4. Annual depreciation on the professional library is $5,614.
5. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 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, $7,548 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	$	28,151
Accounts receivable		0
Teaching supplies		10,826
Prepaid insurance		16,242
Prepaid rent		2,166
Professional library		32,481
Accumulated depreciation—Professional library				$	9,746
Equipment		99,000
Accumulated depreciation—Equipment					17,325
Accounts payable					26,000
Salaries payable					0
Unearned training fees					12,500
Common stock					22,464
Retained earnings					82,000
Dividends		43,310
Tuition fees earned					110,438
Training fees earned					41,143
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,972
Insurance expense		0
Rent expense		23,826
Teaching supplies expense		0
Advertising expense		7,579
Utilities expense		6,063
Totals	$	321,616		$	321,616

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 $82,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.

Answer 1

Trail Balance Opening trail Balance Adjustments Debit Debit Credit Debit Credit Credit $ 28,151 Cash 28,151 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 7,548 7,548 $ 8,393 | $ 2,807 | $ 13,435 10,826 2,433 16,242 2,166 2,166 $ 32,481 32,481 $ 15,360 2$ 9,746 5,614 $ 99,000 99,000 $ 28,552 $ 26,000 $ 11,227 17,325 26,000 2$ 24 400 400 12,500 | $ 2$ 7,500 5,000 $ 22,464 $ 82,000 Common stock 22,464 Retained earnings Dividends Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Salaries expense 2$ 82,000 $ 43,310 43,310 $ 7,548 $ 5,000 $ 1,17,986 $ 46,143 1,10,438 41,143 5,614 5,614 $ 11,227 $ 11,227 $ 52,372 $ 2,807 $ 23,826 2$ 51,972 400 Insurance expense 2$ 2,807 Rent expense Teaching supplies expense Advertising expense |Utilities expense 23,826 8,393 8,393 2$ 7,579 7,579 6,063 6,063 3,21,616 | S 40,989 | S 40,989| $3,46,405 $3,46,405 3,21,616| $ Totals

Income Statement Balance Sheet Tuition fees earned Training fees earned 1,17,986 Assets Stockholder's Equity and Liabilities Current Liabilities $ 46,143 Current Assets $ 28,151 $ 7,548 Accounts payable Salaries payable Unearned training fees Total Income Cash 1,64,129 26,000 Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Total Current Assets Professional library Accumulated depreciation-Professional library Equipment Accumulated depreciation-Equipment Less: Expenses Depreciation expense–Professional library Depreciation expense Equipment Salaries expense Insurance expense 400 $ 2,433 $ 13,435 $ 2,166 5,614 7,500 11,227 52,372 53,733 Total Current Liabilities Stockholder's Equity 2,807 33,900 Rent expense Teaching supplies expense Advertising expense |Utilities expense Net Income $ 32,481 $-15,360 $ $ 99,000 $-28,552| $ 23,826 17,121 Common stock 22,464 8,393 Retained earnings 7,579 84,938 2$ 2$ 1,07,402 6,063 70,448 Total Assets $ 1,41,302 Total Stockholder's Equity and Liabilities $ 1,41,302 46,248 Statement of Retained Earnings Opening of Retained Earnings 82,000 Add: Net Income 46,248 Less: Dividends 2$ -43,310 Closing of Retained Earnings 2$ 84,938