Question

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 $3,996 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,464 are available at year-end.
3. Annual depreciation on the equipment is $15,986.
4. Annual depreciation on the professional library is $7,993.
5. On September 1, WTI agreed to do five courses for a client for $2,400 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 $12,000 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, $13,653 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	$	27,547
Accounts receivable		0
Teaching supplies		10,594
Prepaid insurance		15,894
Prepaid rent		2,120
Professional library		31,784
Accumulated depreciation—Professional library				$	9,537
Equipment		98,000
Accumulated depreciation—Equipment					16,954
Accounts payable					21,000
Salaries payable					0
Unearned training fees					12,000
Common stock					24,027
Retained earnings					84,000
Dividends		42,381
Tuition fees earned					108,069
Training fees earned					40,261
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		50,858
Insurance expense		0
Rent expense		23,320
Teaching supplies expense		0
Advertising expense		7,417
Utilities expense		5,933
Totals	$	315,848		$	315,848

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 $84,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.
  

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Answer 1

Part a: Transaction a. General Journal Insurance expense Prepaid insurance Debit Credit 3,996 3,996 7,130 Teaching supplies expense Teaching supplies 7,130 10594-3464 c. 15,986 Depreciation expense-Equipment Accumulated depreciation-Equipment 15,986 7,993 Depreciation expense-Professional library Accumulated depreciation Professional library 7,993 Unearned training fees Training fees earned 4,800 4,800 (2400*2) 13,653 13,653 Accounts receivable Tuition fees earned 400 Salaries expense Salaries payable 400 (100*2*2) 2,120 Rent expense Prepaid rent 2,120

Part 2a Cash 27,547 Equipment 98,000 Unadj. Bal. Un adj. Bal. Adj. Bal. 27,547 Adj. Bal. 98,000 Accounts Receivable Unadj. Bal. Accumulated Depreciation Equipment Un adj. Bal. 16,954 15,986 13,653 Adj. Bal. 13,653| Adj. Bal. 32,940 Accounts Payable Teaching Supplies 10,594 Unadj. Bal. Un adj. Bal. 21,000 7,130 Adj. Bal. 3,464 Adj. Bal. 21,000 Salaries Payable Prepaid Insurance 15,894 Unadj. Bal. Un adj. Bal. 3,996 Adj. Bal. 11,898 Adj. Bal. Prepaid Rent Unearned Training Fees Unadj. Bal. Un adj. Bal. 12,000 2,120 4,800 Adj. Bal. Adj. Bal. 7,200 common stock Professional Library 31,784 Unadj. Bal. Un adj. Bal. 24,027 Adj. Bal. 31,784 Adj. Bal. 24,027 Accumulated Depreciation-Professional Library Unadj. Bal. 9,537 7,993 Dividends 42,381 Un adj. Bal. Adj. Bal. 17,530 Adj. Bal. 42,381

Training Fees Earned Unadj. Bal. Un adj. Bal. 40,261 4,800 Rent Expense 23,320 2,120 Adj. Bal. 45,061 Adj. Bal. 25,440 Depreciation Expense-Professional Library Unadj. Bal. d 7,993 Un adj. Bal. Teaching Supplies Expense 0 7,130 Adj. Bal. 7,993 Adj. Bal. 7,130 Depreciation Expense - Equipment Unadj. Bal. 15,986 Advertising Expense 7,417 Un adj. Bal. Adj. Bal. 15,986 Adj. Bal. Bal. I 7,417 Salaries Expense 50,858 400 Utilities Expense 5,933 Unadj. Bal. Un adj. Bal. Adj. Bal. 51,258 Adj. Bal. 5,933 Retained earning Un adj. Bal. 84,000 Adj. Bal. 84,000

Part 2b WELLS TECHNICAL INSTITUTE Adjusted Trial Balance December 31. Credit Debit 27547 13,653 3,464 11,898 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 earning 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 31,784 17,530 98,000 32,940 21,000 400 7,200 24,027 84,000 42,381 121,722 45,061 7,993 15,986 51,258 3,996 25,440 7,1300 7,417 5,933 353880 353880

WELLS TECHNICAL INSTITUTE Income Statement For Year Ended December 31. Revenues Training fees earned 45,061 Tuition fees earned 121,722 WELLS TECHNICALINSTITUTE Statement of retained earning For Year Ended December 31. Retained earning, at beg. Add: Net income 41 84,000 41,630 125630 42,381 Less: Dividends 166,783 Retained earning, December 31. 83,249 Total revenues Expenses Depreciation expense-Equipment 15,986 Salaries expense Insurance expense Rent expense Teaching supplies expense Utilities expense Advertising expense Depreciation expense- Professional library 51,258 3,996 25,440 7,130 5,933 7,417 7,993 Total expenses 125,153 Net income 41,630

WELLS TECHNICAL INSTITUTE Balance Sheet December 31 Assets Cash Accounts receivable Teaching supplies Prepaid insurance 27547 13,653 3,464 11,898 14254 Professional library Accumulated depreciation-Professional library Equipment Accumulated depreciation Equipment Total assets 31,784 - 17,530 98,000 -32,940) 65060 135876 Liabilities 21,000 Accounts payable Salaries payable Une arned training fees 400 7,200 Total liabilities 28600 Equity common stock Retained earning 24,027 83,249 Total equity Total liabilities and equity 107,276 135,876