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.

1. An analysis of WTI's insurance policies shows that $3,335 of coverage has expired.
2. An inventory count shows that teaching supplies costing $2,891 are available at year-end.
3. Annual depreciation on the equipment is $13,342.
4. Annual depreciation on the professional library is $6,671.
5. On September 1, WTI agreed to do five courses for a client for $2,600 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 $13,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
6. 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, $9,903 of the tuition has been earned by WTI.
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
	Debit			Credit
Cash	$	27,094
Accounts receivable		0
Teaching supplies		10,420
Prepaid insurance		15,632
Prepaid rent		2,085
Professional library		31,262
Accumulated depreciation—Professional library				$	9,380
Equipment		105,000
Accumulated depreciation—Equipment					16,675
Accounts payable					25,000
Salaries payable					0
Unearned training fees					13,000
Common stock					33,318
Retained earnings					76,000
Dividends		41,684
Tuition fees earned					106,293
Training fees earned					39,599
Depreciation expense—Professional library		0
Depreciation expense—Equipment		0
Salaries expense		50,022
Insurance expense		0
Rent expense		22,935
Teaching supplies expense		0
Advertising expense		7,295
Utilities expense		5,836
Totals	$	319,265		$	319,265

3-a. Prepare Wells Technical Institute's income statement for the year.
3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $76,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.

Answer 1

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Wells Technical Institute
Adjusted Trial Balance	Unadjusted		Adjustments		Adjusted
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit
Cash	27,094.00				27,094.00
Accounts Receivable			9,903.00		9,903.00
Teaching Supplies	10,420.00			7,529.00	2,891.00
Prepaid Insurance	15,632.00			3,335.00	12,297.00
Prepaid Rent	2,085.00			2,085.00	-
Professional Library	31,262.00				31,262.00
Accumulated Depreciation- Professional Library		9,380.00		6,671.00		16,051.00
Equipment	105,000.00				105,000.00
Accumulated Depreciation- Equipment		16,675.00		13,342.00		30,017.00
Accounts Payable		25,000.00				25,000.00
Salaries Payable				400.00		400.00
Unearned Training Fees		13,000.00	5,200.00			7,800.00
Common Stock		33,318.00				33,318.00
Retained Earnings		76,000.00				76,000.00
Dividends	41,684.00				41,684.00
Tuition Fees Earned		106,293.00		9,903.00		116,196.00
Training Fees Earned		39,599.00		5,200.00		44,799.00
Depreciation- Professional Library			6,671.00		6,671.00
Depreciation- Equipment			13,342.00		13,342.00
Salaries Expense	50,022.00		400.00		50,422.00
Insurance Expense			3,335.00		3,335.00
Rent Expense	22,935.00		2,085.00		25,020.00
Teaching Supplies Expense			7,529.00		7,529.00
Advertising Expense	7,295.00				7,295.00
Utilities Expense	5,836.00				5,836.00
Total	319,265.00	319,265.00	48,465.00	48,465.00	349,581.00	349,581.00

Answer 3 a
Income Statement
Particulars	Amount $	Amount $
Tuition Fees Earned	116,196.00
Training Fees Earned	44,799.00
Total Revenue		160,995.00
Less: Expenses
Depreciation- Professional Library	6,671.00
Depreciation- Equipment	13,342.00
Salaries Expense	50,422.00
Insurance Expense	3,335.00
Rent Expense	25,020.00
Teaching Supplies Expense	7,529.00
Advertising Expense	7,295.00
Utilities Expense	5,836.00
Total expense		119,450.00
Profit		41,545.00

Answer 3 b
Statement of Retained Earnings	Amount $
Opening Balance	76,000.00
Add: Profit	41,545.00
Less: Dividends	41,684.00
Closing balance	75,861.00

Answer 3 c
Balance Sheet
As at 31st December
Assets	Amount $	Amount $
Current Assets
Cash	27,094.00
Accounts Receivable	9,903.00
Teaching Supplies	2,891.00
Prepaid Insurance	12,297.00
Current Assets		52,185.00
Non Current Assets
Plant, Property & Equipment
Professional Library	31,262.00
Accumulated Depreciation- Professional Library	(16,051.00)	15,211.00
Equipment	105,000.00
Accumulated Depreciation- Equipment	(30,017.00)	74,983.00
Plant, Property & Equipment		90,194.00
Non Current Assets		90,194.00
Total Assets		142,379.00
Liabilities
Current Liabilities
Accounts Payable	25,000.00
Salaries Payable	400.00
Unearned Training Fees	7,800.00
Current Liabilities		33,200.00
Total Liabilities		33,200.00
Stockholder's Equity
Common Stock	33,318.00
Retained Earnings	75,861.00
Total Stockholder's Equity		109,179.00
Total Liabilities & Stockholder's Equity		142,379.00