Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO P1, P2, P3 [The following information applies to the questions displayed below.] Wells Technical Institute (WTI), a school owned by Tristana Wells, 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 of December 31, 2015, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2015, follow Additional Information Items a. An analysis of WTI's insurance policies shows that $2,542 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,204 are available at year-end 2015. c. Annual depreciation on the equipment is $10,170. d. Annual depreciation on the professional library is $5,085. 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 $2,500, 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 2016. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,499 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.) g. WTI'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. h. The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2015 Debit Credit $ 27,547 Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library Accumulated depreciation-Professional library Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retained earnings 10,594 15,894 2,120 31,784 $ 74,152 9,537 16,954 37,294 12,500 13,477 53,908 Dividends 42,381 108,069 40,261 Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Salaries expense 50,858 Insurance expense. Rent expense 23,320 Teaching supplies expense Advertising expense Utilities expense 7,417 5,933 $292,000 $292,000 Totals Problem 3-3A Part 1 Required: 1. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end. View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 An analysis of WTI's insurance policies shows that $2,542 of coverage has expired Note: Enter debits before credits. General Journal Credit Transaction Debit . View general journal Record entry Clear entry An analysis of WTI's insurance policies shows that $2,542 1 of coverage has expired 2 An inventory count shows that teaching supplies costing $2,204 are available at year-end 2015. Annual depreciation on the equipment is $10,170. 3 Annual depreciation on the professional library is $5,085. 4 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 $2,500, and the client paid the 5 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 2016. 6 On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,499 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.) LO 7 WTI'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. 8 The balance in the Prepaid Rent account represents rent for December. Problem 3-3A Part 2 2.1 Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts. Cash Equipment Unadj. Bal Unadj. Bal Adj. Bal Adj. Bal. Accounts Receivable Accumulated Depreciation-Equipment Unadj. Bal. Unadj. Bal Adj. Bal Adj. Bal Teaching Supplies Accounts Payable Unadj. Bal. Unadj. Bal Adj. Bal. Adj. Bal. Prepaid Insurance Salaries Payable Unadj. Bal Unadj. Bal Adj. Bal. Adj. Bal. Prepaid Rent Unearned Training Fees Unadj. Bal. Unadj. Bal. Adj. Bal Adj. Bal. Professional Library Common stock Unadj. Bal Unadj. Bal. Adj. Bal Adj. Bal. Accumulated Depreciation-Professional Library Retained earnings Unadj. Bal Unadj. Bal Adj. Bal Adj. Bal. Tuition Fees Earned Dividends Unadj. Bal. Unadj. Bal Adj. Bal Adj. Bal. Training Fees Earned Rent Expense Unadj. Bal Unadj. Bal Adj. Bal Adj. Bal. Depreciation Expense-Professional Library Teaching Supplies Expense Unadj. Bal Unadj. Bal. Adj. Bal Adj. Bal. Depreciation Expense-Equipment Advertising Expense Unadj. Bal Unadj. Bal. Adj. Bal Adj. Bal Salaries Expense Utilities Expense Unadj. Bal |Unadj. Bal Adj. Bal Adj. Bal Insurance Expense Unadj. Bal Adj. Bal 2.2 Prepare an adjusted trial balance. WELLS TECHNICAL INSTITUTE Adjusted Trial Balance December 31, 2015 Debit Credit Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library Accumulated depreciation-Professional library Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retained earnings Dividends Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals Problem 3-3A Part 3 3.1 Prepare Wells Technical Institute's income statement for the year 2015. WELLS TECHNICAL INSTITUTE Income Statement For Year Ended December 31, 2015 3.2 Prepare Wells Technical Institute's statement of retained earnings for the year 2015 WELLS TECHNICAL INSTITUTE Statement of Retained Earnings For Year Ended December 31, 2015 Retained earnings, December 31, 2014 Retained earnings, December 31, 2015 3.3 Prepare Wells Technical Institute's balance sheet as of December 31, 2015 WELLS TECHNICAL INSTITUTE Balance Sheet December 31, 2015