Question

Chapter 3, last 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 a through h that require adjusting entries on December 31, 2017, follow.
  
Additional Information Items

An analysis of WTI's insurance policies shows that $3,071 of coverage has expired.

An inventory count shows that teaching supplies costing $2,662 are available at year-end 2017.

Annual depreciation on the equipment is $12,285.

Annual depreciation on the professional library is $6,142.

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 $3,000, 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 $3,040 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	$	26,944
Accounts receivable		0
Teaching supplies		10,362
Prepaid insurance		15,545
Prepaid rent		2,073
Professional library		31,088
Accumulated depreciation—Professional library				$	9,328
Equipment		72,533
Accumulated depreciation—Equipment					16,582
Accounts payable					33,702
Salaries payable					0
Unearned training fees					15,000
Common stock					15,000
Retained earnings					50,908
Dividends		41,452
Tuition fees earned					105,701
Training fees earned					39,379
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		49,743
Insurance expense		0
Rent expense		22,803
Teaching supplies expense		0
Advertising expense		7,254
Utilities expense		5,803
Totals	$	285,600		$	285,600
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

3a
	INCOME STATEMENT OF WELLS TECHNICAL INSTITUTE FOR THE YEAR 2017
					(Amount in $)
	EXPENSES			INCOME
	Teaching supplies		7,700	Tuition fees earned		119,301
	Salaries Expenses		50,143	Training fees earned		39,379
	Rent expenses		24,876
	Advertising expense		7,254
	Utility expenses		5,803
	Insurance expenses		3,071
	Depreciation on equipment		12,285
	Depreciation on professional liabrary		6,142
	Net profit for the year		41,406
			158,680			158,680
3b	STATEMENT OF OWNERS EQUITY OF WELLS TECHNICAL INSTITUTE FOR THE YEAR 2017
		Common Stock	Retained Earnings	Total Equity
	Balance as on January 1' 2017	15,000	50,908	65,908
	Current year profit		41,406	41,406
	Less: Dividents		(41,452)	(41,452)
	Balance as on December 31' 2017	15,000	50,862	65,862
3c	BALANCE SHEET OF WELLS TECHNICAL INSTITUTE AS OF 31 DECEMBER 2017
	LIABILITIES			ASSETS
	Owners capital		65,862	Equipment	72,533
				Less: Accumulated depreciation	28,867	43,666
	Unearned training fees		9,000	Professional Liabrary	31,088
				Less: Accumulated depreciation	15,470	15,618
	Accounts payable		33,702
				Accounts receivable		7,600
	Salary payable		400	Teching supplies		2,662
				Prepaid Rent		-
				Prepaid Insurance		12,474
				Cash		26,944
			108,964			108,964
	Working note for additional items
	Insurance policy expired
1	Insurance expenses	3071
	To Prepaid insurance		3071
	Year end stock of teaching supplies
2	Teaching supply stock	2662
	To Teaching supplies		2662
	Depreciaiton on equipment
3	Depeciation on equipment	12285
	To Accumulated depreciation on equipment		12285
	Depreciation on professional liabrary
4	Depeciation on equipment	6142
	To Accumulated depreciation on equipment		6142
	Five months fees received on November 1 (Two months in current year)
5	Unearned training fees	6000
	To tution fees earned		6000
	Teaching fee receivable (From October 15 to December 31)
6	Accounts receivable	7600
	To Tuition fees earned		7600
	(3040*2.5 months)
	Accrued salary for 2 days for 2 employees payable
7	Salaries expenses	400
	To Salary payable		400
	(2 days *100/day* for 2 employees)
	Rent for december
8	Rent	2073
	To Prepaid Rent		2073
	(Prepaid rent represents rent for december)