Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements A1 P1 P2 P3 Watson Technical Institute (WTI), a school owned by Tom Watson on January 1, 2011 provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjusted trial balance as at December 31, 2011, follows. WTI initially records prepaid expenses and uncarned revenues in statement of financial position accounts and performs adjusting entries annually. Descriptions of items a through h that require adjusting entries on December 31, 2011, follow. excel www.mheducation.asia/olc/wild Additional Information Items a. An analysis of WTI's insurance policies shows that $3,000 of coverage has expired. b. An inventory count shows that teaching supplies costing $2.600 are available at year-end 2011. c. Annual depreciation on the equipment is $12,000. d. Annual depreciation on the professional library is $6.000. e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,200, and the client paid the first five months' fees in advance. When the cash was received the Unearned Training Fees account was credited. The fee for the sixth month will be recorded when it is collected in 2012. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) Chapter 3 Adjusting Accounts and Preparing Financial Statements g. WTI's two employees are paid weekly. As at the end of the year, two days' salaries have accrued at the rate of $100 per day for each employee. h. The balance in the Prepaid Rent account represents rent for December. 125 Microsoft Excel Book Edt Yew Insert Format Tools Dita Accounting Window Belo DEBER. I to 212193 2004 22 BE 10 BTU 6%, 43 Credit S 9,000 WATSON TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2011 Cash Debit 4 Accounts receivable $ 36,000 5 Teaching supplies 0 10,000 6. Prepaid insurance 15.000 7 Prepaid rent 2.000 8 Professional library 30.000 9 Accumulated depreciation - Professional library 10 Equipment 70,000 11 Accumulated depreciation - Equipment 12 Accounts payable 1200 13 Salaries payable 14 Unearned training fees 15 Share capital 16 Retained earnings 17 Dividends 30,000 18 Tuition fees earned 19 Training fees earned 20 Depreciation expense - Professional library 0 0 21 Depreciation expense - Equipment 22 Salaries expense 48,000 0 23 Insurance expense 24 Rent expense 22.000 0 25 Teaching supplies expense 7,000 28 Advertising expense 5,600 27 Utilities expense $275,600 28 Totals 29 She 16.000 36.000 0 11.000 63.600 0 102.000 38,000 $ 275,600 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 Watson Technical Institute's income statement and statement of changes in equity for the year 2011 and prepare its statement of financial position as at December 31, 2011. Check 2 et Cr Training Fees Earned, $4 400:12 C. Tuition Fe Earned, $7.500 (3) Ad Trial balan totals $301,500. 4) Net income $38.500. Total Equity (December 20111 572 100
