Question

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3

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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

1. An analysis of WTI's insurance policies shows that $2,807 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,433 are available at year-end 2017.
3. Annual depreciation on the equipment is $11,227.
4. Annual depreciation on the professional library is $5,614.
5. 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 $3,000, 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.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,519 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.)
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.

WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2017
	Debit			Credit
Cash	$	28,151
Accounts receivable		0
Teaching supplies		10,826
Prepaid insurance		16,242
Prepaid rent		2,166
Professional library		32,481
Accumulated depreciation—Professional library				$	9,746
Equipment		75,784
Accumulated depreciation—Equipment					17,325
Accounts payable					35,886
Salaries payable					0
Unearned training fees					15,000
T. Wells, Capital					68,862
T. Wells, Withdrawals		43,310
Tuition fees earned					110,438
Training fees earned					41,143
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,972
Insurance expense		0
Rent expense		23,826
Teaching supplies expense		0
Advertising expense		7,579
Utilities expense		6,063
Totals	$	298,400		$	298,400

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.
  

Answer 1

WELLS TECHNICAL INSTITUTE

       Adjusting Entries

      December 31^st 2017

S. No.	Particulars	Debit ($)	Credit ($)
a)	Insurance expense A/C                                                   DR.	2,807
	To Prepaid Insurance A/C		2,807
	(Being insurance policies coverage expired)
b)	Teaching Supplies Expense A/C                                      DR. ($ 10,826 - $ 2,433)	8,393
	To Teaching Supplies A/C		8,393
	(Being Teaching Supplies consumed)
c)	Depreciation expense—Equipment A/C                       DR.	11,227
	To Accumulated depreciation—Equipment A/C		11,227
	(Being depreciation on equipment charged)
d)	Depreciation expense—Professional Library A/C      DR.	5,614
	To Accumulated depreciation— Professional Library A/C		5,614
	(Being depreciation on Professional Library charged)
e)	Unearned Training fees A/C                                            DR. ($ 3,000 x 2)	6,000
	To Training fees earned A/C		6,000
	(Being Unearned Training Fees reversed)
f)	Accounts Receivable A/C                                                 DR. ($2,519 x 2.5)	6,297.5
	To Tuition fees earned A/C		6,297.5
	(Being tution fees earned)
g)	Salaries Expense A/C                                                        DR.              ($ 100 x 2 x 2)	400
	To Salaries Payable A/C		400
	(Being salaries accrued)
h)	Rent expense A/C                                                           DR.	2,166
	To Prepaid Rent A/C		2,166
	(Being rent for December recognised)