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. WTI 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 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.

Annual depreciation on the equipment is $13,200.

Annual depreciation on the professional library is $7,200. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.

On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class.

At December 31, $7,500 of the tuition has been earned by WTI.

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 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

T. Wells, Capital 90,000

T. Wells, Withdrawals 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

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

\ Prepare Wells Technical Institute's statement of owner's equity for the year. The T. Wells, Capital account balance was $90,000 on December 31 of the prior year.

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

Answer 1