Question

House of Instructors, Inc. (HTI), is a company that runs a tutoring service for high school and university students. The company reported the following amounts in its post-closing trial balance, prepared at the end of its first fiscal year, at August 31.

Accounts Payable	$	70
Accounts Receivable		190
Accumulated Depreciation		1,170
Cash		670
Common Stock		2,800
Equipment		11,700
Interest Payable		37
Notes Payable (long-term)		7,700
Retained Earnings		893
Supplies		110

The company encountered the following events during September:

1. HTI provided 100 hours of regular hourly tutoring at the rate of $22 per hour, all of which was collected in cash.
2. HTI paid instructors at the hourly rate of $11 per hour. On September 28, HTI paid for 90 hours of instructor time and promised to pay the remaining hours worked. TIP: The total hours of expense in b. should match the total hours of revenue in a.
3. HTI hosted an all-night review session on September 29 for people cramming for midterm exams, at a special price of $10 per attendee. Rather than collect cash at the time of the review session, HTI will send bills in October to the 72 people who attended the review session.
4. At the beginning of the night-long review session, HTI paid $170 cash to its instructors for wages. No additional salaries and wages will be paid for the review session.
5. HTI collected $170 cash on account from students who received tutoring during the summer.
6. HTI also collected $220 cash from a high school for a tutoring session to be held in October.
7. HTI determined that depreciation for September should be $170.
8. Although HTI adjusted its accounts on August 31, it has not yet paid the $37 monthly interest owed on the promissory note, for either August or September. The note is due in three years.
9. HTI has only $37 of supplies left at September 30.
10. HTI’s income taxes are approximately 30% of income before tax.

Required:

1. Prepare HTI’s journal entries and adjusting journal entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2. 2-a. Prepare HTI’s income statement for the month ended September 30.

3. 2-b. Prepare HTI’s statement of retained earnings for the month ended September 30.

4. Prepare HTI’s classified balance sheet at September 30. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

House of Instructors, Inc. Journal Enteries Trans. Particulars a. Cash a/c To Tution Revenue (Revenue in cash) Dr. Debit in $ Credit in $ 2200 2200 b. Instructor expense a/c Dr. 1100 To Cash To Instructor expense payable (Instructor expense paid) 100 x 11 = 1100 990 110 Dr. 720 Accounts Receivable a/c To Tution Revenue (Review session on account) 720 d. Dr. 170 Instructor expense a/c To Cash (Instructor expense paid) 170 e. Dr. 170 Cash a/c To Accounts Receivable (Cash from debtors) 170 f. Dr. 220 Cash a/c To Unearned Revenue (Advance from client) 220 Adjusting Enteries Trans. Particulars g. Depreciation Expense a/c Dr. To Accum. Depre - Equip. (To record depreciation ) Debit in $ Credit in $ 170 170 h. Dr. 37 Interest Expense a/c To Interest Payable (Interest accrued) 37 i. Dr. 73 Supplies Expense a/c To Supplies (Suplies expensed) 110-37 73 Dr. 411 Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) 411

Worksheet For the period ending Aug. 31 Particulars Cash Accounts Receivable Supplies Equipment Accum. Depre - Equip. Accounts Payable Interest Payable Instructor expense payable Unearned Revenue Income Tax Payable Notes Payable (long-term) Common Stock Retained Earnings Tution Revenue Instructor expense Depreciation Expense Supplies Expense Interest Expense Income Tax Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 2100 2100 740 740 110 37 11700 11700 1170 1340 70 70 37 74 110 110 220 220 411 7700 7700 2800 2800 893 893 2920 2920 1270 1270 170 170 73 73 37 37 411 411 15920 15920 691 691 16538 16538 2920 Statement of Income For the period ending Aug. 31 Tution Revenue Less: Instructor expense Depreciation Expense Supplies Expense Interest Expense 1270 170 1550 1370 -411 959 Income Tax Expense Net Income Statement of Retained Earnings For the period ending Aug. 31 Beginning Balance Net Income 893 959 1852

Amounts in $ Amounts in $ Balance sheet As at Aug. 31 Assets Amounts in $ Amounts in $ Liabilities Current Assets Current Liabilities Cash 2100 Accounts Payable Accounts Receivable 740 Interest Payable Supplies 37 2877 Instructor expense payable Unearned Revenue Non Current Assets Income Tax Payable Equipment 11700 Accum. Depre - Equip -1340 10360 Non Current Liabilities Notes Payable (long-term) 70 74 110 220 411 885 7700 Shareholders Equity Common Stock Retained Earnings 13237 Total Liabilities & equity 2800 1852 4652 13237 Total Assets