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, 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

1. An analysis of WTI's insurance policies shows that $3,468 of coverage has expired.
2. An inventory count shows that teaching supplies costing $3,006 are available at year-end 2017.
3. Annual depreciation on the equipment is $13,871.
4. Annual depreciation on the professional library is $6,936.
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 $2,800, 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.
6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,019 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, 2017
	Debit			Credit
Cash	$	28,151
Accounts receivable		0
Teaching supplies		10,826
Prepaid insurance		16,242
Prepaid rent		2,166
Professional library		32,481
Accumulated depreciation—Professional library				$	9,746
Equipment		75,784
Accumulated depreciation—Equipment					17,325
Accounts payable					36,886
Salaries payable					0
Unearned training fees					14,000
Common stock					10,000
Retained earnings					58,862
Dividends		43,310
Tuition fees earned					110,438
Training fees earned					41,143
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		51,972
Insurance expense		0
Rent expense		23,826
Teaching supplies expense		0
Advertising expense		7,579
Utilities expense		6,063
Totals	$	298,400		$	298,400

3-a. Prepare Wells Technical Institute's income statement for the year 2017.
3-b. Prepare Wells Technical Institute's statement of owner's equity for the year 2017.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31, 2017.
  

Answer 1

Adjustment entries
Event	Date	general journal	Debit	credit
A	Dec 31, 2017	Insurance expense	3,468.00
		Prepaid insurance		3,468.00
		(To record expires Insurance Policy.)
B	Dec 31, 2017	Teaching supplies expense	7,820.00
		Teaching supplies		7,820.00
		(To record Teaching supplies used during the period.) (10826-3006)
C	Dec 31, 2017	Depreciation expense - equipment	13,871.00
		Accumulated depreciation - equipment		13,871.00
		(To record depreciation expense - equipment)
D	Dec 31, 2017	Depreciation expense - Professional library	6,936.00
		Accumulated depreciation - Professional library		6,936.00
		(To record depreciation expense - Professional library.)
E	Dec 31, 2017	Unearned Training Fees	5,600.00
		Training fees earned		5,600.00
		(To record Training fees earned on which cash already received.) (2800*2)
F	Dec 31, 2017	Account receivable	10,047.50
		Tuition fees earned		10,047.50
		(to record Accrued tuition fees) (4019*2.5)
G	Dec 31, 2017	Salaries expense	400.00
		Salaries payable		400.00
		(To record salaries expense this paid in future.) (100*2 employee*2 days)
H	Dec 31, 2017	Rent expense	2,166.00
		Prepaid rent		2,166.00
		(to record rent of December.)

Adjusted Trial Balance

WELLS TECHNICAL INSTITUTE
Adjusted Trial Balance
December 31, 2017
	Debit	Credit	Remarks
Cash	28,151.00		28,151.00
Accounts receivable	10,047.50		10,047.50
Teaching supplies	3,006.00		10826-7820
Prepaid insurance	12,774.00		16242-3468
Prepaid rent	-		2166-2166
Professional library	32,481.00		32,481.00
Accumulated depreciation—Professional library		16,682.00	9746+6936
Equipment	75,784.00		75,784.00
Accumulated depreciation—Equipment		31,196.00	17325+13871
Accounts payable		36,886.00	36,886.00
Salaries payable		400.00	400.00
Unearned training fees		8,400.00	14000-5600
Common stock		10,000.00	10,000.00
Retained earnings		58,862.00	58,862.00
Dividends	43,310.00		43,310.00
Tuition fees earned		120,485.50	110438+10047.5
Training fees earned		46,743.00	41143+5600
Depreciation expense—Professional library	6,936.00		6,936.00
Depreciation expense—Equipment	13,871.00		13,871.00
Salaries expense	52,372.00		51972+400
Insurance expense	3,468.00		3,468.00
Rent expense	25,992.00		23826+2166
Teaching supplies expense	7,820.00		7,820.00
Advertising expense	7,579.00		7,579.00
Utilities expense	6,063.00		6,063.00
Totals	$    329,654.50	$     329,654.50

WELLS TECHNICAL INSTITUTE
Income statement
December 31, 2017
Revenue
Tuition fees earned	120,485.50
Training fees earned	46,743.00
Total revenue		167,228.50
Less : expense
Depreciation expense—Professional library	6,936.00
Depreciation expense—Equipment	13,871.00
Salaries expense	52,372.00
Insurance expense	3,468.00
Rent expense	25,992.00
Teaching supplies expense	7,820.00
Advertising expense	7,579.00
Utilities expense	6,063.00
Total expense		124,101.00
Net income		$         43,127.50

WELLS TECHNICAL INSTITUTE
Statement of equity
December 31, 2017
Retained earnings at beginning	58,862.00
Add: Net income	43,127.50
Less: Dividend	(43,310.00)
Retained earnings at Ending	58,679.50
Common stock	10,000.00
Retained earnings at Ending	58,679.50
owner's equity		$         68,679.50

WELLS TECHNICAL INSTITUTE
Balance sheet
December 31, 2017
Assets
Current assets
Cash	28,151.00
Accounts receivable	10,047.50
Teaching supplies	3,006.00
Prepaid insurance	12,774.00
Total current assets		53,978.50
Non-current assets
Equipment	75,784.00
Accumulated depreciation—Equipment	(31,196.00)	44,588.00
Professional library	32,481.00
Accumulated depreciation—Professional library	(16,682.00)	15,799.00
Total assets		$       114,365.50
liabilities and stockholder's equity
Current liabilities
Accounts payable	36,886.00
Salaries payable	400.00
Unearned training fees	8,400.00
Total current liabilities		45,686.00
Stockholder's equity
Common stock	10,000.00
Retained earnings	58,679.50
Total stockholder's equity		68,679.50
Total liabilities and stockholder's equity		$       114,365.50