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

An analysis of WTI's insurance policies shows that $2,542 of coverage has expired.

An inventory count shows that teaching supplies costing $2,204 are available at year-end 2017.

Annual depreciation on the equipment is $10,170.

Annual depreciation on the professional library is $5,085.

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 $2,600, 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 $2,399 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			Credit
Cash	$	28,000
Accounts receivable		0
Teaching supplies		10,768
Prepaid insurance		16,155
Prepaid rent		2,155
Professional library		32,307
Accumulated depreciation—Professional library				$	9,693
Equipment		75,368
Accumulated depreciation—Equipment					17,232
Accounts payable					37,613
Salaries payable					0
Unearned training fees					13,000
T. Wells, Capital					68,493
T. Wells, Withdrawals		43,078
Tuition fees earned					109,846
Training fees earned					40,923
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,694
Insurance expense		0
Rent expense		23,705
Teaching supplies expense		0
Advertising expense		7,539
Utilities expense		6,031
Totals	$	296,800		$	296,800

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

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a	Insurance Expenses	2,542.00
	Prepaid Insurance		2,542.00
	(record the insurance expenses)
b	Teaching Supplies Expense	8,564.00		$10,768 - $2,204
	Teaching Supplies		8,564.00
	(record the teaching supplies expenses)
c	Depreciation Expense - Equipment	10,170.00
	Accumulated Dep. - Equipment		10,170.00
	(record the depreciation expense- equip.)
d	Depreciation Expense - Professional Library	5,085.00
	Accumulated Dep. - Professional Library		5,085.00
	(record the dep. expense- professional library)
e	Unearned Training Fees	5,200.00		$2,600 X 2 Month
	Training Fees Earned		5,200.00
	(record the training fees earned)
f	Accounts Receivable	5,997.50		$2,399 X 2.50 Months
	Tution Fees Earned		5,997.50
	(record the tution fees earned)
g	Salaries Expense	400.00		2 Days X 2 Employees X $100
	Salaries Payable		400.00
	(record the salaries expense)
h	Rent Expense	2,155.00
	Prepaid Rent		2,155.00
	(record the rent expense)

Answer 2-a.
Cash					Accounts Receivable					Teaching Supplies
Bal.	28,000.00				Bal.	-				Bal.	10,768.00	8,564.00	b
					f	5,997.50
End. Bal.	28,000.00				End. Bal.	5,997.50				End. Bal.	2,204.00
Prepaid Insurance					Prepaid Rent					Professional Liabrary
Bal.	16,155.00	2,542.00	a		Bal.	2,155.00	2,155.00	h		Bal.	32,307.00
End. Bal.	13,613.00				End. Bal.	-				End. Bal.	32,307.00
Accumulated Dep. - Professional Liabrary					Equipment					Accumulated Dep. - Equipment
Bal.		9,693.00			Bal.	75,368.00				Bal.		17,232.00
		5,085.00	d			-						10,170.00	c
End. Bal.		14,778.00			End. Bal.	75,368.00				End. Bal.		27,402.00
Accounts Payable					Salaries Payable					Unearned Training Fees
Bal.		37,613.00			Bal.		-			Bal.		13,000.00
							400.00	g		e	5,200.00
End. Bal.		37,613.00			End. Bal.		400.00			End. Bal.		7,800.00
T.Wells, Capital										T.Wells, Withdrawals
Bal.		68,493.00								Bal.	43,078.00
End. Bal.		68,493.00								End. Bal.	43,078.00
Tution Fees Earned					Training Fees Earned					Dep. Expense - Professional Liabrary
Bal.		109,846.00			Bal.		40,923.00			Bal.	-
		5,997.50	f				5,200.00	e		d	5,085.00
End. Bal.		115,843.50			End. Bal.		46,123.00			End. Bal.	5,085.00
Dep. Expense - Equipment					Salaries Expense					Insurance Expense
Bal.	-				Bal.	51,694.00				Bal.	-
c	10,170.00				g	400.00				a	2,542.00
End. Bal.	10,170.00				End. Bal.	52,094.00				End. Bal.	2,542.00
Rent Expense					Teaching Supplies Expense					Advertising Expense
Bal.	23,705.00				Bal.	-				Bal.	7,539.00
h	2,155.00				b	8,564.00
End. Bal.	25,860.00				End. Bal.	8,564.00				End. Bal.	7,539.00
Utilities Expense
Bal.	6,031.00
End. Bal.	6,031.00

Answer 2-b.
Well Technical Institute
Adjusted Trial Balance
As at Dec 31, 2017
Accounts Title	Debits	Credits
Cash	28,000.00
Accounts Receivable	5,997.50
Teaching Supplies	2,204.00
Prepaid Insurance	13,613.00
Prepaid Rent	-
Professional Liabrary	32,307.00
Accumulated Dep. - Professional Liabrary		14,778.00
Equipment	75,368.00	-
Accumulated Dep. - Equipment		27,402.00
Accounts Payable		37,613.00
Salaries Payable		400.00
Unearned Training Fees		7,800.00
T.Wells, Capital		68,493.00
T.Wells, Withdrawals	43,078.00
Tution Fees Earned		115,843.50
Training Fees Earned		46,123.00
Dep. Expense - Professional Liabrary	5,085.00
Dep. Expense - Equipment	10,170.00
Salaries Expense	52,094.00
Insurance Expense	2,542.00
Rent Expense	25,860.00
Teaching Supplies Expense	8,564.00
Advertising Expense	7,539.00
Utilities Expense	6,031.00
Total	318,452.50	318,452.50