Required information Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO P1, P2, P3, P4, P5, P6 [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. WTI 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 a. An analysis of WTI's insurance policies shows that $2,400 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,800 are available at year-end. c. Annual depreciation on the equipment is $13,200. d. Annual depreciation on the professional library is $7,200. e. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees. f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $7,500 of the tuition has been earned by WTI. 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 Debit Credit Cash Accounts receivable Teaching supplies $ 34,000 0 8,000 Prepaid insurance 12,000 Prepaid rent 3,000 Professional library 35,000 Accumulated depreciation-Professional library Equipment $ 10,000 80,000 Accumulated depreciation-Equipment Accounts payable 15,000 26,000 Salaries payable 0 Unearned training fees 12,500 Common stock 10,000 Retained earnings. 80,000 Dividends 50,000 Tuition fees earned 123,900 Training fees earned 40,000 Depreciation expense-Professional library 0 Depreciation expense-Equipment 0 Salaries expense 50,000 Insurance expense 0 Rent expense Advertising expense 33,000 Teaching supplies expense 0 Utilities expense Totals 6,000 6,400 $317,400 $317,400 Required: 1. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end. 2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts. 2-b. Prepare an adjusted trial balance. 3-a. Prepare Wells Technical Institute's income statement for the year. 3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $80,000 on December 31 of the prior year. 3-c. Prepare Wells Technical Institute's balance sheet as of December 31.