Question
Following is data for Pitt-Vaughn Academy (PVA). Use the data below to answer each of the enumerated requirements. Pitt-Vaughn Academy (PVA), a school owned by
Following is data for Pitt-Vaughn Academy (PVA). Use the data below to answer each of the enumerated requirements.
Pitt-Vaughn Academy (PVA), a school owned by Lily Pitt-Vaughn, provides training to individuals who pay tuition directly to the school. PVA also offers training to groups in off-site locations. PVA 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
- An analysis of PVA's insurance policies shows that $3,732 of coverage has expired.
- An inventory count shows that teaching supplies costing $3,235 are available at year-end.
- Annual depreciation on the equipment is $14,929.
- Annual depreciation on the professional library is $7,464.
- On September 1, PVA agreed to do five courses for a client for $2,700 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 $13,500 cash in advance for all five courses on September 1, and PVA credited Unearned Training Fees.
- On October 15, PVA agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $11,600 of the tuition has been earned by PVA.
- PVA'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.
- The balance in the Prepaid Rent account represents rent for December.
Pitt-Vaughn Academy Unadjusted Trial Balance December 31 | |||||
| Debit |
| Credit | ||
Cash | $ | 27,396 |
|
|
|
Accounts receivable |
| 0 |
|
|
|
Teaching supplies |
| 10,536 |
|
|
|
Prepaid insurance |
| 15,806 |
|
|
|
Prepaid rent |
| 2,108 |
|
|
|
Professional library |
| 31,610 |
|
|
|
Accumulated depreciationProfessional library |
|
|
| $ | 9,484 |
Equipment |
| 73,751 |
|
|
|
Accumulated depreciationEquipment |
|
|
|
| 16,861 |
Accounts payable |
|
|
|
| 36,022 |
Salaries payable |
|
|
|
| 0 |
Unearned training fees |
|
|
|
| 13,500 |
L. Pitt-Vaughn, Capital |
|
|
|
| 67,016 |
L. Pitt-Vaughn, Withdrawals |
| 42,149 |
|
|
|
Tuition fees earned |
|
|
|
| 107,477 |
Training fees earned |
|
|
|
| 40,040 |
Depreciation expenseProfessional library |
| 0 |
|
|
|
Depreciation expenseEquipment |
| 0 |
|
|
|
Salaries expense |
| 50,579 |
|
|
|
Insurance expense |
| 0 |
|
|
|
Rent expense |
| 23,188 |
|
|
|
Teaching supplies expense |
| 0 |
|
|
|
Advertising expense |
| 7,376 |
|
|
|
Utilities expense |
| 5,901 |
|
|
|
Totals | $ | 290,400 |
| $ | 290,400 |
Required:
- Prepare the required adjusting journal entries for items a through h.
- Prepare the Adjusted Trial Balance
- Prepare the Income Statement for the year end
- Prepare the Statement of Owners Equity for the year
- Prepare the Balance Sheet as of December 31
Use the information in the financial statements to calculate the following ratios:
- Return on Assets
- Debt ratio
- Profit margin
- Current ratio
Below are the industry averages for the corresponding ratios
- Return on Assets = 11.48%
- Debt ratio = 42%
- Profit margin = 21.60%
- Current ratio = 1.06
How does the companys performance compare to that of the industry? Provide a brief discussion of the companys performance. Your discussion should be at least 4 well-articulated sentences.
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