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, 2018, 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, 2018, follow.
  
Additional Information Items

1. An analysis of WTI's insurance policies shows that $2,400 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,800 are available at year-end 2018.
3. Annual depreciation on the equipment is $13,200.
4. Annual depreciation on the professional library is $7,200.
5. 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 2019.
6. 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.)
7. 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.
8. The balance in the Prepaid Rent account represents rent for December.
   

WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2018
	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, December 31, 2017					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

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

2A) Post the balance from the unadjusted trial balance and the adjusting entries into the T-accounts.
2B) Prepare an adjusted trial balance.

3A)Prepare Wells Technical Institute's income statement for the year 2018.
3B) Prepare Wells Technical Institute's statement of retained earnings for the year 2018.
3C) Prepare Wells Technical Institute's balance sheet as of December 31, 2018.

Answer 1

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Due to character limit I am attaching the image for T accounts and Trial Balance.

Wells Technical Institute
Adjusting Entries
Account	Debit $	Credit $
Insurance Expense	2,400.00
Prepaid Insurance		2,400.00
Supplies Expense	5,200.00
Teaching Supplies		5,200.00
Depreciation- Professional Library	7,200.00
Accumulated Depreciation- Professional Library		7,200.00
Depreciation- Equipment	13,200.00
Accumulated Depreciation- Equipment		13,200.00
Unearned Training Fees	5,000.00
Training Fees earned		5,000.00
Accounts Receivable	7,500.00
Tuition Fees Earned		7,500.00
Salaries Expense	400.00
Salaries Payable		400.00
Rent Expense	3,000.00
Prepaid Rent		3,000.00

Answer 3 a
Income Statement
Particulars	Amount $	Amount $
Tuition Fees Earned	131,400.00
Training Fees Earned	45,000.00
Total Revenue		176,400.00
Less: Expenses
Depreciation- Professional Library	7,200.00
Depreciation- 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
Profit		49,600.00

Answer 3 b
Statement of Retained Earnings	Amount $
Opening Balance	80,000.00
Add: Profit	49,600.00
Less: Dividends	50,000.00
Closing balance	79,600.00

Answer 3 c
Balance Sheet
As at 31st December
Assets	Amount $	Amount $
Current Assets
Cash	34,000.00
Accounts Receivable	7,500.00
Teaching Supplies	2,800.00
Prepaid Insurance	9,600.00
Current Assets		53,900.00
Non Current Assets
Plant, Property & Equipment
Professional Library	35,000.00
Accumulated Depreciation- Professional Library	(17,200.00)	17,800.00
Equipment	80,000.00
Accumulated Depreciation- Equipment	(28,200.00)	51,800.00
Plant, Property & Equipment		69,600.00
Non Current Assets		69,600.00
Total Assets		123,500.00
Liabilities
Current Liabilities
Accounts Payable	26,000.00
Salaries Payable	400.00
Unearned Training Fees	7,500.00
Current Liabilities		33,900.00
Total Liabilities		33,900.00
Stockholder's Equity
Common Stock	10,000.00
Retained Earnings	79,600.00
Total Stockholder's Equity		89,600.00
Total Liabilities & Stockholder's Equity		123,500.00