Following is the unadjusted trial balance for Augustus Institute as of December 31, 2009...

Following is the unadjusted trial balance for Augustus Institute as of December 31, 2009, which initially records prepaid expenses and unearned revenues in balance sheet accounts. The Institute provides oneon- 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, 2009.

Additional Information Items

a. An analysis of the Institute’s insurance policies shows that $3,000 of coverage has expired.

b. An inventory count shows that teaching supplies costing $3,000 are available at year-end 2009.

c. Annual depreciation on the equipment is $17,000.

d. Annual depreciation on the professional library is $6,000.

e. On November 1, the Institute agreed to do a special six-month course (starting immediately) for a client. The contract calls for a $2,600 monthly fee, and the client paid the first five months’ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The last one month’s fees will be recorded when collected in 2010.

f. On October 15, the Institute agreed to teach a four-month class (beginning immediately) to an individual for $3,900 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received.

g. The Institute’s only employee is paid weekly. As of the end of the year, two days’ wages have accrued at the rate of $170 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 owner’s equity for the year 2009, and prepare its balance sheet as of December 31, 2009.