Question

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

[The following information applies to the questions displayed below.]

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 athrough h that require adjusting entries on December 31, 2017, follow.
  
Additional Information Items

An analysis of WTI's insurance policies shows that $4,129 of coverage has expired.

An inventory count shows that teaching supplies costing $3,578 are available at year-end 2017.

Annual depreciation on the equipment is $16,515.

Annual depreciation on the professional library is $8,258.

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 $2,900, 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 $5,220 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	$	27,547
Accounts receivable		0
Teaching supplies		10,594
Prepaid insurance		15,894
Prepaid rent		2,120
Professional library		31,784
Accumulated depreciation—Professional library				$	9,537
Equipment		74,152
Accumulated depreciation—Equipment					16,954
Accounts payable					35,294
Salaries payable					0
Unearned training fees					14,500
T. Wells, Capital					67,385
T. Wells, Withdrawals		42,381
Tuition fees earned					108,069
Training fees earned					40,261
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		50,858
Insurance expense		0
Rent expense		23,320
Teaching supplies expense		0
Advertising expense		7,417
Utilities expense		5,933
Totals	$	292,000		$	292,000

Problem 3-3A Part 1

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

Answer 1

Solution 1:

Wells Technical Institute - Adjusting Journal Entries
S. No	Particulars	Debit	Credit
a	Insurance Expense Dr	$4,129.00
	To Prepaid Insurance		$4,129.00
	(Being insurance expense recoganized)
b	Teaching Supplies Expenses Dr ($10,594 - $3,578)	$7,016.00
	To Teaching Supplies		$7,016.00
	(Being Teaching supplies expenses recorded)
c	Depreciation Expense - Equipment Dr	$16,515.00
	To Accumulated Depreciation - Equipment		$16,515.00
	(Being Annual depreciation expense on equipment recorded)
d	Depreciation Expense - Professional Library Dr	$8,258.00
	To Accumulated Depreciation - Professional Library		$8,258.00
	(Being Annual depreciation expense on Prof. library recorded)
e	Unearned Trainng Fees Dr ($2900*2)	$5,800.00
	To Traning Fees earned		$5,800.00
	(Being amount of training fees earned recorded)
f	Accounts Receivables Dr	$13,050.00
	To Tution fees earned (5220*2.5)		$13,050.00
	(Being Tution fees earned for 2.5 months recorded)
g	Salaries Expenses Dr ($100*2*2)	$400.00
	To Salaries Payable		$400.00
	(Being Salaries expense due for 2 days for 2 employees recorded)
h	Rent Expense Dr	$2,120.00
	To Prepaid Rent		$2,120.00
	(Being rent expense for december recorded)