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, 2016, 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, 2016, follow.

Additional Information Items

An analysis of WTI's insurance policies shows that $2,400 of coverage has expired.

An inventory count shows that teaching supplies costing $2,800 are available at year-end 2016.

Annual depreciation on the equipment is $13,200.

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 $2,500, 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 2017.

On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 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, 2016
	Debit		Credit
Cash	$	34,000
Accounts receivable		0
Teaching supplies		8,000
Prepaid insurance		12,000
Prepaid rent		3,000
Professional library		35,000
Accumulated depreciation—Professional library			$	10,000
Equipment		80,000
Accumulated depreciation—Equipment				15,000
Accounts payable				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		33,000
Teaching supplies expense		0
Advertising expense		6,000
Utilities expense		6,400
Totals	$	317,400	$	317,400

rev: 07_12_2016_QC_CS-55458

3.

value:
14.28 points

Required information

Required:     

1. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end.

References

eBook & Resources

WorksheetLearning Objective: 03-P1 Prepare and explain adjusting entries.Learning Objective: 03-P3 Prepare financial statements from an adjusted trial balance.

Difficulty: 3 HardLearning Objective: 03-P2 Explain and prepare an adjusted trial balance.

Check my work

4.

value:
14.28 points

Required information

2.1 Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.

2.2 Prepare an adjusted trial balance.

References

eBook & Resources

WorksheetLearning Objective: 03-P1 Prepare and explain adjusting entries.Learning Objective: 03-P3 Prepare financial statements from an adjusted trial balance.

Difficulty: 3 HardLearning Objective: 03-P2 Explain and prepare an adjusted trial balance.

Check my work

5.

value:
14.28 points

Required information

3.1 Prepare Wells Technical Institute's income statement for the year 2016.

3.2 Prepare Wells Technical Institute's statement of retained earnings for the year 2016.

3.3 Prepare Wells Technical Institute's balance sheet as of December 31, 2016.

Answer 1

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1	Insurance Expenses	2,400.00
	Prepaid Insurance		2,400.00
	(record the insurance expenses)
2	Teaching Supplies Expense	5,200.00		$8,000 - $2,800
	Teaching Supplies		5,200.00	$8,000 - $2,800
	(record the teaching supplies expenses)
3	Depreciation Expense - Equipment	13,200.00
	Accumulated Dep. - Equipment		13,200.00
	(record the depreciation expense- equip.)
4	Depreciation Expense - Professional Library	7,200.00
	Accumulated Dep. - Professional Library		7,200.00
	(record the dep. expense- professional library)
5	Unearned Training Fees	5,000.00		$2,500 X 2 Month
	Training Fees Earned		5,000.00	$2,500 X 2 Month
	(record the training fees earned)
6	Accounts Receivable	7,500.00		$3,000 X 2.50 Months
	Tution Fees Earned		7,500.00	$3,000 X 2.50 Months
	(record the tution fees earned)
7	Salaries Expense	400.00		2 Days X 2 Employees X $100
	Salaries Payable		400.00	2 Days X 2 Employees X $100
	(record the salaries expense)
8	Rent Expense	3,000.00
	Prepaid Rent		3,000.00
	(record the rent expense)

Answer 2.
Well Technical Institure
Trial Balance
As at Dec 31, 2016
	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance
Accounts Title	Debits	Credits	Debits	Credits	Debits	Credits
Cash	34,000.00				34,000.00
Accounts Receivable	-		7,500.00		7,500.00
Teaching Supplies	8,000.00			5,200.00	2,800.00
Prepaid Insurance	12,000.00			2,400.00	9,600.00
Prepaid Rent	3,000.00			3,000.00	-
Professional Liabrary	35,000.00				35,000.00
Accumulated Dep. - Professional Liabrary		10,000.00		7,200.00		17,200.00
Equipment	80,000.00				80,000.00
Accumulated Dep. - Equipment		15,000.00		13,200.00		28,200.00
Accounts Payable		26,000.00				26,000.00
Salaries Payable		-		400.00		400.00
Unearned Training Fees		12,500.00	5,000.00			7,500.00
Common stock		10,000.00				10,000.00
Retained Earnings		80,000.00				80,000.00
Dividends	50,000.00				50,000.00
Tution Fees Earned		123,900.00		7,500.00		131,400.00
Training Fees Earned		40,000.00		5,000.00		45,000.00
Dep. Expense - Professional Liabrary	-		7,200.00		7,200.00
Dep. Expense - Equipment	-		13,200.00		13,200.00
Salaries Expense	50,000.00		400.00		50,400.00
Insurance Expense	-		2,400.00		2,400.00
Rent Expense	33,000.00		3,000.00		36,000.00
Teaching Supplies Expense	-		5,200.00		5,200.00
Advertising Expense	6,000.00				6,000.00
Utilities Expense	6,400.00				6,400.00
Total	317,400.00	317,400.00	43,900.00	43,900.00	345,700.00	345,700.00
		-		-		-
Answer 3.1.
Well Technical Institure
Income Statement
For the Year Ended Dec 31, 2016
Revenue
Tution Fees Earned	131,400.00
Training Fees Earned	45,000.00
Total Revenue		176,400.00
Expense
Dep. Expense - Professional Liabrary	7,200.00
Dep. Expense - Equipment	13,200.00
Salaries Expense	50,400.00
Insurance Expense	2,400.00
Rent Expense	36,000.00
Teaching Supplies Expense	5,200.00
Advertising Expense	6,000.00
Utilities Expense	6,400.00
Total Expense		126,800.00
Net Income		49,600.00
Answer 3.2.
Well Technical Institure
Statement of Retained Earnings
For the Year Ended Dec 31, 2016
Beginning Balance Jan 1, 2016		80,000.00
Net Income		49,600.00
Sub-total		129,600.00
Dividends		(50,000.00)
Ending Balance, Dec 31, 2016		79,600.00
Answer 3.3.
Well Technical Institure
Balance Sheet
As on Dec 31, 2016
Assets
Current Assets
Cash		34,000.00
Accounts Receivable		7,500.00
Teaching Supplies		2,800.00
Prepaid Insurance		9,600.00	53,900.00
Property, Plant & Equipment
Professional Liabrary	35,000.00
Accumulated Dep. - Professional Liabrary	(17,200.00)	17,800.00
Equipment	80,000.00
Accumulated Dep. - Equipment	(28,200.00)	51,800.00	69,600.00
Total Assets			123,500.00
Liabilities & Stockholders' Equity
Liabilities
Current Liabilities
Accounts Payable		26,000.00
Salaries Payable		400.00
Unearned Training Fees		7,500.00	33,900.00
Long Term Liabilities			-
Total Liabilities			33,900.00
Stockholders' Equity
Common stock		10,000.00
Retained Earnings		79,600.00
Total Stockholders' Equity			89,600.00
Total Liabilities & Stockholders' Equity			123,500.00