Question

Following is data for Pitt-Vaughn Academy (PVA). Use the data below to answer each of the enumerated requirements.

Pitt-Vaughn Academy (PVA), a school owned by Lily Pitt-Vaughn, provides training to individuals who pay tuition directly to the school. PVA also offers training to groups in off-site locations. PVA 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

1. An analysis of PVA's insurance policies shows that $3,732 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,235 are available at year-end.
3. Annual depreciation on the equipment is $14,929.
4. Annual depreciation on the professional library is $7,464.
5. On September 1, PVA agreed to do five courses for a client for $2,700 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 $13,500 cash in advance for all five courses on September 1, and PVA credited Unearned Training Fees.
6. On October 15, PVA agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $11,600 of the tuition has been earned by PVA.
7. PVA'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.

Pitt-Vaughn Academy Unadjusted Trial Balance December 31
	Debit			Credit
Cash	$	27,396
Accounts receivable		0
Teaching supplies		10,536
Prepaid insurance		15,806
Prepaid rent		2,108
Professional library		31,610
Accumulated depreciation—Professional library				$	9,484
Equipment		73,751
Accumulated depreciation—Equipment					16,861
Accounts payable					36,022
Salaries payable					0
Unearned training fees					13,500
L. Pitt-Vaughn, Capital					67,016
L. Pitt-Vaughn, Withdrawals		42,149
Tuition fees earned					107,477
Training fees earned					40,040
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		50,579
Insurance expense		0
Rent expense		23,188
Teaching supplies expense		0
Advertising expense		7,376
Utilities expense		5,901
Totals	$	290,400		$	290,400

Required:

1. Prepare the required adjusting journal entries for items a through h.
2. Prepare the Adjusted Trial Balance
3. Prepare the Income Statement for the year end
4. Prepare the Statement of Owner’s Equity for the year
5. Prepare the Balance Sheet as of December 31

Use the information in the financial statements to calculate the following ratios:

1. Return on Assets
2. Debt ratio
3. Profit margin
4. Current ratio

Below are the industry averages for the corresponding ratios

• Return on Assets = 11.48%
• Debt ratio = 42%
• Profit margin = 21.60%
• Current ratio = 1.06

IM ONLY HAVING PROBLEMS WITH using the financial statements to calculate the following ratios:(I ONLY NEED HELP WITH THE 1-4 QUESTIONS

Answer 1

In the books of Pitt-Vaughn Academy

Note 1: It is assumed that PVA's Insurance policy entry has not been passed.Hence prepaid insurance enrty is reversed & insurance expenses debited.

Note 2: It is assumed that teaching supplies used during the year are not debited to Profit & loss account but shown as Closing stock.Hence, Closing stock is reduced & consumption fo teaching material is debited as expenditure.

Note 3: 2 courses of $2700 each started & completed at the end of the year is still shown in Unearned Training Fees.Earned training fees are now credited & Unearned training fees are debited.

Note 4: It is assumed that Tution fees are received on 31 December in cash.

Answer 1: Adjusting Journal entries

Date	Account Titles	Debit	Credit
31-Dec	Insurance Expenses ( Note 1)	3732
	Prepaid Insurance		3732
31-Dec	Teaching Supplies Expenses (10536-3235)	7301
	Teaching Supplies ( Note 2 )		7301
31-Dec	Depreciation	14929
	Accumulated Depreciation-Equipment		14929
31-Dec	Depreciation	7464
	Accumulated Depreciation-Professional Liabrary		7464
31-Dec	Unearned Training Fees ( 2700*2)	5400
	Training Fees ( Note 3 )		5400
31-Dec	Cash ( Note 4 )	11600
	Tution Fees Earned		11600
31-Dec	Salaries Expenses ( 100* 2days* 2 employees )	400
	Salaries payable		400
31-Dec	Rent Expenses	2108
	Prepaid Rent Account		2108

Answer 2 :Adjusted Trial Balance as on 31 December

Account Titles	Debit	Credit
Cash	38996
Account Receivable	0
Teaching Supplies	3235
Prepaid Insurance	12074
Prepaid Rent	0
Professional Liabrary	31610
Accumulated Depreciation-Professional Liabrary		16948
Equipment	73751
Accumulated Depreciation-Equipment		31790
Accounts Payable		36022
Salaries Payable		400
Unearned Training Fees		8100
L. Pitt-Vaughn, Capital		67,016
L. Pitt-Vaughn, Withdrawals	42,149
Tution Fees Earned		119077
Training Fees Earned		45440
Depreciation -Equipment	14929
Depreciation- Professional Liabrary	7464
Salaries Expenses	50979
Insurance Expenses	3732
Rent Expesnse	25296
Teaching Supplies Expenses	7301
Advertising Expense	7376
Utilities Expenses	5901
Total	324793	324793

Answer 3:Income Statement for the year Ended 31 Decemeber

Particulars	Amount
Revenue ( WN 1 )	159117
Employees Benefit Expense	50979
Depreciation & Amortization Expense	22393
Other Expense ( WN 2 )	49606
Profit Before Tax	36139
Income Tax	0
Profit After Taxes	36139

WN 1 Revenue

Tution Fees Earned	119077
Training Fees Earned	40040
Total	159117

WN 2 Other Expense

Insurance Expenses	3732
Rent Expesnse	25296
Teaching Supplies Expenses	7301
Advertising Expense	7376
Utilities Expenses	5901
Total	49606

Answer 4 :Statement of Owner's Equity for the year ended 31 December

Opening balance of Owenr's Equity	24,867
($67016-$42149)
Add: Net Income during the year ( Income statement )	36139
Less : Owner's Withdrawals	($42,149)
Closing balance of Owenr's Equity	18,857