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. Its unadjusted trial balance as of December 31, 2017, 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, 2017, follow. Additional Information Items An analysis of WTI's insurance policies shows that $3,600 of coverage has expired. An inventory count shows that teaching supplies costing $3,120 are available at year-end 2017. Annual depreciation on the equipment is $14,400. Annual depreciation on the professional library is $7,200. 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 $2,700, 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 2018. On October 15,

WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,380 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.)

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, 2017

Debit

Cash- $27,547

Accounts receivable- 0

Teaching supplies- 10,594

Prepaid insurance- 15,894

Prepaid rent- 2,120

Professional library- 31,784

Equipment- 74,152

Dividends- 42,381

Depreciation expense—Professional library 0

Depreciation expense—Equipment 0

Salaries expense 50,858

Insurance expense- 0

Rent expense- 23,320

Teaching supplies expense- 0

Advertising expense -7,417

Utilities expense -5,933

$ 292,000

Credit

Accumulated depreciation—Professional library

$

9,537

Accumulated depreciation—Equipment

16,954

Accounts payable

36,294

Salaries payable

0

Unearned training fees

13,500

Common stock

14,000

Retained earnings

53,385

Tuition fees earned

108,069

Training fees earned

40,261

Problem 3-3A Part 2 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
.

Additional Information Items

A. An analysis of WTI's insurance policies shows that $3,600 of coverage has expired.

B. An inventory count shows that teaching supplies costing $3,120 are available at year-end 2017.

C. Annual depreciation on the equipment is $14,400.

D. Annual depreciation on the professional library is $7,200.

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 $2,700, 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 2018.

F. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,380 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.

Prepare Wells Technical Institute's balance sheet as of December 31, 2017.

	WELLS TECHNICAL INSTITUTE Balance Sheet December 31, 2017 Assets Cash Accounts receivable Teaching supplies Prepaid insurance Professional library Accumulated depreciation—Professional library Depreciation expense—Equipment Equipment Liabilities 0 Equity Total equity

Answer 1

WELLS TECHNICAL INSTITUTE

Worksheet

For the Year Ended December 31,2017

Accounts Title	Unadjusted	Trial Balance	Adjustments		Adjusted	Trial Balance
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$27,547				27,547
Accounts Receivable	0		$10,950		10,950
Teaching Supplies	10,594			$7,474	3,120
Prepaid Insurance	15,894			3,600	12,294
Prepaid Rent	2,120			2,120	0
Professional Library	31,784				31,784
Equipment	74,152				74,152
Dividends	42,381				42,381
Depreciation Expense, Professional Library	0		7,200		7,200
Depreciation Expense, Equipment	0		14,400		14,400
Salaries Expense	50,858		200		51,058
Insurance Expense	0		3,600		3,600
Rent Expense	23,320		2,120		25,440
Teaching Supplies Expense	0		7,474		7,474
Advertising Expense	7,417				7,417
Utilities Expense	5,933				5,933
Accumulated Depreciation, Professional Library		$9,537		7,200		$16,737
Accumulated Depreciation, Equipment		16,954		14,400		31,354
Accounts Payable		36,294				36,294
Salaries Payable		0		200		200
Unearned Training Fees		13,500	5,400			8,100
Common Stock		14,000				14,000
Retained Earnings		53,385				53,385
Tuition Fees Earned		108,069		10,950		119,019
Training Fees Earned		40,261		5,400		45,661
Totals	$292,000	$292,000	$51,344	$51,344	$324,750	$324,750

WELLS TECHNICAL INSTITUTE

Income Statement

For the Year Ended December 31,2017

Accounts Title	Amount	Amount
Revenue:-
Tuition Fees Earned	$119,019
Training Fees Earned	45,661
Total Revenue		$164,680
Less:- Expenses:-
Depreciation Expense, Professional Library	7,200
Depreciation Expense, Equipment	14,400
Salaries Expense	51,058
Insurance Expense	3,600
Rent Expense	25,440
Teaching Supplies Expense	7,474
Advertising Expense	7,417
Utilities Expense	5,933
Total Expenses		$(122,522)
Net Income		$42,158

WELLS TECHNICAL INSTITUTE

Statement of Retained Earnings

For the Year Ended December 31,2017

Accounts Title	Amount
Retained Earnings, Beginning	$53,385
Less:- Dividends	(42,381)
	$11,004
Add:- Net Income	42,158
Retained Earnings, December 31,2017	$53,162

WELLS TECHNICAL INSTITUTE

Balance Sheet

December 31,2017

Accounts Title	Amount	Amount
Assets:-
Current Assets:-
Cash	$27,547
Accounts Receivable	10,950
Teaching Supplies	3,120
Prepaid Insurance	12,294
Total Current Assets		$53,911
Fixed Assets:-
Professional Library	31,784
Less:- Accumulated Depreciation, Professional Library	(16,737)
Equipment	74,152
Less:- Accumulated Depreciation, Equipment	(31,354)
Total Fixed Assets		$57,845
Total Assets		$111,756
Liabilities and Stockholders Equity:-
Current Liabilities:-
Accounts Payable	36,294
Salaries Payable	200
Unearned Training Fees	8,100
Total Current Liabilities		$44,594
Stockholders Equity:-
Common Stock	14,000
Retained Earnings, December 31,2017	53,162
Total Stockholders Equity		$67,162
Total Liabilities and Stockholders Equity		$111,756

Working Notes:-

E. Unearned Training Fees Earned for two months ( November and December), So the training fees Earned is $5,400 ($2,700×2).

F. Tuition fees Earned for Two and Half month (October 15 to December 31) but not received.

So the amount is $10,950 ($4,380×2.5) is credited as Tuition fees Earned and same amount Debited as Accounts Receivable.

G. Accrual Salaries are $200 ($100×2 days)