Exercise 1-3

Use the following information and the table on page 8 to complete the exercise beginning on page 9.

Digital Learning, Inc. provides computer training to individuals and to off-site groups. Tuition is paid directly to the school. The schools unadjusted trial balance for the year ending December 31, 2012, is shown in the table below. Digital Learning, Inc. initially records their prepaid expenses and unearned revenues in balance sheet accounts. Adjusting entries must be made on December 31 for each of the following items (18).

1.A review of the schools insurance policies found that $2,800 of coverage has expired.

2.A 2012 year-end inventory shows available teaching supplies costing $2,450 remaining in stock.

3.The annual depreciation on the schools equipment is $11,000.

4.The annual depreciation on the schools professional library is $6,250.

5.At the request of a client, the school conducted a special six-month course, starting November 1. The school charged the client a monthly fee of $1,800. The first five months were paid in advance. Upon receipt of the cash payment, the school credited the Unearned Training Fees account. The school will record the sixth months fee upon collection in 2013.

6.The school conducted a four-month course for one student, starting October 15, for a monthly fee of $2,500, payable upon course completion. As of December 31, no payments have been received. Accruals are applied to the nearest half-month.

7.The school pays its three employees weekly. As of December 31, two days salaries have accrued for each employee at a daily rate of $125.

8.The Prepaid Rent account balance represents Decembers rent.

DIGITAL LEARNING, INC. Unadjusted Trial Balance December 31, 2012
	Debit	Credit
Cash	$24,500
Account receivable	0
Teaching supplies	8,000
Prepaid insurance	16,000
Prepaid rent	2,200
Professional library	28,000
Accumulated depreciationProfessional library		$8,500
Equipment	68,000
Accumulated depreciationEquipment		16,500
Accounts payable		35,100
Salaries payable		0
Unearned training fees		10,500
Common stock		11,000
Retained earnings		52,900
Dividends	42,000
Tuition fees earned		103,900
Training fees earned		38,500
Depreciation expenseProfessional library	0
Depreciation expenseEquipment	0
Salaries expense	52,000
Insurance expense	0
Rent expense	24,800
Teaching supplies expense	0
Advertising expense	6,000
Utilities expense	5,400	_______
Totals	$276,900	$276,900

For this exercise, complete the following four tasks:

1.Prepare T-accounts for Digital Learning, Inc. Use balances from the unadjusted trial balance.

Cash					Equipment
Unadj. Bal.	24,500				Unadj. Bal.		68,000
Accounts Receivable					Accumulated Depreciation Equipment
Unadj. Bal.	0							Unadj. Bal.	16,500
								Adj. Bal.
Teaching Supplies					Accounts Payable
Unadj. Bal.	8,000							Unadj. Bal.	35,100
					Salaries Payable
								Unadj. Bal.	0
Prepaid Insurance
Unadj. Bal.	16,000							Adj. Bal.
					Unearned Training Fees
								Unadj. Bal.	10,500
Prepaid Rent
Unadj. Bal.	2,200							Adj. Bal.
Adj. Bal.	0				Common Stock
								Unadj. Bal.	11,000
Professional Library
Unadj. Bal.	28,000				Retained Earnings
								Unadj. Bal.	52,900
Accumulated Depreciation Professional Library
					Dividends
		Unadj. Bal.	8,500		Unadj. Bal.	42,000
Adj. Bal.

Tuition Fees Earned

Rent Expense

Unadj. Bal.

103,900

Unadj. Bal.

24,800

Adj. Bal.

Adj. Bal.

Training Fees Earned

Teaching Supplies Expense

Unadj. Bal.

38,500

Unadj. Bal.

0

Adj. Bal.

Adj. Bal.

Depreciation Expense Professional Library

Advertising Expense

Unadj. Bal.

0

Unadj. Bal.

6,000

Adj. Bal.

Depreciation Expense Equipment

Utilities Expense

Unadj. Bal.

0

Unadj. Bal.

5,400

Adj. Bal.

Salaries Expense

Unadj. Bal.

52,000

Adj. Bal.

Insurance Expense

Unadj. Bal.

0

Adj. Bal.