Following is the unadjusted trial balance for Alcorn Institute as of December 31, 2011, wh...

Following is the unadjusted trial balance for Alcorn Institute as of December 31, 2011, which initially records prepaid expenses and unearned revenues in balance sheet accounts. The Institute provides one-on-one training to individuals who pay tuition directly to the business and offers extension training to groups in off-site locations. Shown after the trial balance are items a through h that require adjusting entries as of December 31, 2011.

Additional Information Items

a. An analysis of the Institute’s insurance policies shows that $6,400 of coverage has expired.

b. An inventory count shows that teaching supplies costing $2,500 are available at year-end 2011.

c. Annual depreciation on the equipment is $4,000.

d. Annual depreciation on the professional library is $2,000.

e. On November 1, the Institute agreed to do a special four-month course (starting immediately) for a client. The contract calls for a $4,600 monthly fee, and the client paid the first two months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The last two months’ fees will be recorded when collected in 2012.

f. On October 15, the Institute agreed to teach a four-month class (beginning immediately) to an i ndividual for $2,200 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (Alcorn’s accruals are applied to the nearest half- month; for example, October recognizes one-half month accrual.)

g. The Institute’s only employee is paid weekly. As of the end of the year, three days’ salaries have accrued at the rate of $180 per day.

h. The balance in the Prepaid Rent account represents rent for December.

Required

1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.

2. Prepare the necessary adjusting journal entries for items a through h, and post them to the T-accounts. Assume that adjusting entries are made only at year-end.

3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.

4. Prepare the company’s income statement and statement of retained earnings for the year 2011, and prepare its balance sheet as of December 31, 2011.