Wells Technical Institute (WTI), a school owned by Tristana Wells, provides trai
ID: 2607931 • Letter: W
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
An analysis of WTI's insurance policies shows that $3,335 of coverage has expired.
An inventory count shows that teaching supplies costing $2,891 are available at year-end 2017.
Annual depreciation on the equipment is $13,342.
Annual depreciation on the professional library is $6,671.
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 2018.
On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,061 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.
2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
2-b. Prepare an adjusted trial balance.
Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
Prepare Wells Technical Institute's income statement for the year 2017.
WELLS TECHNICAL INSTITUTEUnadjusted Trial Balance
December 31, 2017 Debit Credit Cash $ 27,396 Accounts receivable 0 Teaching supplies 10,536 Prepaid insurance 15,806 Prepaid rent 2,108 Professional library 31,610 Accumulated depreciation—Professional library $ 9,484 Equipment 73,751 Accumulated depreciation—Equipment 16,861 Accounts payable 37,022 Salaries payable 0 Unearned training fees 12,500 Common stock 12,000 Retained earnings 55,016 Dividends 42,149 Tuition fees earned 107,477 Training fees earned 40,040 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 50,579 Insurance expense 0 Rent expense 23,188 Teaching supplies expense 0 Advertising expense 7,376 Utilities expense 5,901 Totals $ 290,400 $ 290,400
Explanation / Answer
Answer a. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Insurance Expenses 3,335.00 Prepaid Insurance 3,335.00 (record the insurance expenses) 2 Teaching Supplies Expense 7,645.00 $10,536 - $2,891 Teaching Supplies 7,645.00 $10,536 - $2,891 (record the teaching supplies expenses) 3 Depreciation Expense - Equipment 13,342.00 Accumulated Dep. - Equipment 13,342.00 (record the depreciation expense- equip.) 4 Depreciation Expense - Professional Library 6,671.00 Accumulated Dep. - Professional Library 6,671.00 (record the dep. expense- professional library) 5 Unearned Training Fees 5,000.00 $2,500 X 2 Month Training Fees Earned 5,000.00 $2,500 X 2 Month (record the training fees earned) 6 Accounts Receivable 10,152.50 $4,061 X 2.50 Months Tution Fees Earned 10,152.50 $4,061 X 2.50 Months (record the tution fees earned) 7 Salaries Expense 400.00 2 Days X 2 Employees X $100 Salaries Payable 400.00 2 Days X 2 Employees X $100 (record the salaries expense) 8 Rent Expense 2,108.00 Prepaid Rent 2,108.00 (record the rent expense) Answer b. Cash Accounts Receivable Teaching Supplies Bal. 27,396.00 Bal. - Bal. 10,536.00 7,645.00 2 6 10,152.50 End. Bal. 27,396.00 End. Bal. 10,152.50 End. Bal. 2,891.00 Prepaid Insurance Prepaid Rent Professional Liabrary Bal. 15,806.00 3,335.00 1 Bal. 2,108.00 2,108.00 8 Bal. 31,610.00 End. Bal. 12,471.00 End. Bal. - End. Bal. 31,610.00 Accumulated Dep. - Professional Liabrary Equipment Accumulated Dep. - Equipment Bal. 9,484.00 Bal. 73,751.00 Bal. 16,861.00 6,671.00 4 13,342.00 3 End. Bal. 16,155.00 End. Bal. 73,751.00 End. Bal. 30,203.00 Accounts Payable Salaries Payable Unearned Training Fees Bal. 37,022.00 Bal. - Bal. 12,500.00 400.00 7 5 5,000.00 End. Bal. 37,022.00 End. Bal. 400.00 End. Bal. 7,500.00 Common stock Retained Earnings Dividends Bal. 12,000.00 Bal. 55,016.00 Bal. 42,149.00 End. Bal. 12,000.00 End. Bal. 55,016.00 End. Bal. 42,149.00 Tution Fees Earned Training Fees Earned Dep. Expense - Professional Liabrary Bal. 107,477.00 Bal. 40,040.00 Bal. - 10,152.50 6 5,000.00 5 4 6,671.00 End. Bal. 117,629.50 End. Bal. 45,040.00 End. Bal. 6,671.00 Dep. Expense - Equipment Salaries Expense Insurance Expense Bal. - Bal. 50,579.00 Bal. - 3 13,342.00 7 400.00 1 3,335.00 End. Bal. 13,342.00 End. Bal. 50,979.00 End. Bal. 3,335.00 Rent Expense Teaching Supplies Expense Advertising Expense Bal. 23,188.00 Bal. - Bal. 7,376.00 8 2,108.00 2 7,645.00 End. Bal. 25,296.00 End. Bal. 7,645.00 End. Bal. 7,376.00 Utilities Expense Bal. 5,901.00 End. Bal. 5,901.00 Answer c. Well Technical Institure Adjusted Trial Balance As at Dec 31, 2017 Accounts Title Debits Credits Cash 27,396.00 Accounts Receivable 10,152.50 Teaching Supplies 2,891.00 Prepaid Insurance 12,471.00 Prepaid Rent - Professional Liabrary 31,610.00 Accumulated Dep. - Professional Liabrary 16,155.00 Equipment 73,751.00 - Accumulated Dep. - Equipment 30,203.00 Accounts Payable 37,022.00 Salaries Payable 400.00 Unearned Training Fees 7,500.00 Common stock 12,000.00 Retained Earnings 55,016.00 Dividends 42,149.00 Tution Fees Earned 117,629.50 Training Fees Earned 45,040.00 Dep. Expense - Professional Liabrary 6,671.00 Dep. Expense - Equipment 13,342.00 Salaries Expense 50,979.00 Insurance Expense 3,335.00 Rent Expense 25,296.00 Teaching Supplies Expense 7,645.00 Advertising Expense 7,376.00 Utilities Expense 5,901.00 Total 320,965.50 320,965.50 - Answer d. Well Technical Institure Income Statement For the Year Ended Dec 31, 2017 Revenue Tution Fees Earned 117,629.50 Training Fees Earned 45,040.00 Total Revenue 162,669.50 Expense Dep. Expense - Professional Liabrary 6671 Dep. Expense - Equipment 13342 Salaries Expense 50979 Insurance Expense 3335 Rent Expense 25296 Teaching Supplies Expense 7645 Advertising Expense 7376 Utilities Expense 5901 Total Expense 120,545.00 Net Income 42,124.50
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