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 $2,939 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,547 are available at year-end.
3. Annual depreciation on the equipment is $11,756.
4. Annual depreciation on the professional library is $5,878.
5. On September 1, WTI agreed to do five courses for a client for $2,800 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 $14,000 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, $7,450 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	$	27,094
Accounts receivable		0
Teaching supplies		10,420
Prepaid insurance		15,632
Prepaid rent		2,085
Professional library		31,262
Accumulated depreciation—Professional library				$	9,380
Equipment		72,935
Accumulated depreciation—Equipment					16,675
Accounts payable					34,976
Salaries payable					0
Unearned training fees					14,000
T. Wells, Capital					66,277
T. Wells, Withdrawals		41,684
Tuition fees earned					106,293
Training fees earned					39,599
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		50,022
Insurance expense		0
Rent expense		22,935
Teaching supplies expense		0
Advertising expense		7,295
Utilities expense		5,836
Totals	$	287,200		$	287,200

3-a. Prepare Wells Technical Institute's income statement for the year.
3-b. Prepare Wells Technical Institute's statement of owner's equity for the year. The T. Wells, Capital account balance was $66,277 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.
  

Answer 1

Working notes: Adjustments Debit Credit $7,4501 Unadjusted Debit Credit $27,094 $0 $10,420 $15,632 $2,085 $31,262 $9,380 $72,935 $16,675 $34,976 $7,873 $2,939 $2,085 $5,878 Post- Adjusted Debit Credit $27,094 $7,450 $2,547 $12,693 $0 $31,262 $15,258 $72,935 $28,431 $34,976 $400 $8,400 $66,277 $41,684 $113,743 $45,199 $11,756 $400 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 T Well's Capital T Well's Drawings Tuition revenue Training revenue Depreciation expense- Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals $5,6001 $14,000 $66,277 $41,684 $106,293 $39,599 $7,450 $5,600 $5,878 $50,022 $5,878 $11,756 $400 $2,939 $2,085 $7,873 $22,935 $11,756 $50,422 $2,939 $25,020 $7,873 $7,295 $5,836 $312,684) $7,295 $5,836 $287,2001 $287,2001 $43,981 $43,981 $312,684 $158,942 3-a WELLS TECHNICAL INSTITUTUE Income Statement For The Year Ended December 31 Revenue Tuition revenue $113,743 Training revenue $45,199 Total revenues Expenses Salaries expense $50,422 Rent expense $25,0201 Advertisir expense $7,295 Teaching supplies expense $7,873 Depreciation expense- Professional library Depreciation expense-Equipment $11,756 Insurance expense $2,939| Utilities expense $5,836 Total expenses Net Income $5,878 $117,019 $41,923 3-b WELLS TECHNICAL INSTITUTUE Statement of Owners' Equity For The Year Ended December 31 T. Wells Capital, Opening balance Add: Net Income during the year $66,277 $41,923 $108,200 $41,684 $66,516 Less: Drawings T.Wells Capital, Closing balance 3-c WELLS TECHNICAL INSTITUTUE Balance Sheet December 31 Assets Current Assets Cash $27,094 $7,450 $2,547 Accounts Receivable Teaching supplies Prepaid Insurance Total Current Assets $12,693 $49,784 Plant, Property and Equipment: Professional Library Less: Accumulated Depreciation $31,262 -$15,258 $16,004 $72,935 -$28,431 $44,504 $60,508 $110,292 Equipment Less: Accumulated Depreciation Plant, Property and Equipment (net) Total Assets Liabilities and Owners' Equity Current Liabilities: Accounts payable Salaries payable Unearned revenue Total Current Liabilities $34,976 $400 $8,400 $43,776 Owner's Equity Total Liabilities and Owners' equity $66,516 $110,292)