Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition
Question:
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
- An analysis of WTI's insurance policies shows that $3,996 of coverage has expired.
- An inventory count shows that teaching supplies costing $3,464 are available at year-end.
- Annual depreciation on the equipment is $15,986.
- Annual depreciation on the professional library is $7,993.
- On September 1, WTI agreed to do five courses for a client for $2,400 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 $12,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
- 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, $13,653 of the tuition has been earned by WTI.
- 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.
- The balance in the Prepaid Rent account represents rent for December.
WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31 | |||||
Debit | Credit | ||||
Cash | $ | 27,547 | |||
Accounts receivable | 0 | ||||
Teaching supplies | 10,594 | ||||
Prepaid insurance | 15,894 | ||||
Prepaid rent | 2,120 | ||||
Professional library | 31,784 | ||||
Accumulated depreciationProfessional library | $ | 9,537 | |||
Equipment | 98,000 | ||||
Accumulated depreciationEquipment | 16,954 | ||||
Accounts payable | 21,000 | ||||
Salaries payable | 0 | ||||
Unearned training fees | 12,000 | ||||
Common stock | 24,027 | ||||
Retained earnings | 84,000 | ||||
Dividends | 42,381 | ||||
Tuition fees earned | 108,069 | ||||
Training fees earned | 40,261 | ||||
Depreciation expenseProfessional library | 0 | ||||
Depreciation expenseEquipment | 0 | ||||
Salaries expense | 50,858 | ||||
Insurance expense | 0 | ||||
Rent expense | 23,320 | ||||
Teaching supplies expense | 0 | ||||
Advertising expense | 7,417 | ||||
Utilities expense | 5,933 | ||||
Totals | $ | 315,848 | $ | 315,848 | |
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 $84,000 on December 31 of the prior year. 3-c. Prepare Wells Technical Institute's balance sheet as of December 31.