Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay…
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Question “Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay…”
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 follows, along with descriptions of items a through h that require adjusting entries on December 31. Additional Information a. An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,800 are available at year-end. C. Annual depreciation on the equipment is $13,200. d. Annual depreciation on the professional library is $7,200. e. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees. f. 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, $7,500 of the tuition has been earned by WTI. g. 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. h. The balance in the Prepaid Rent account represents rent for December.
WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31 Credit Debit $ 34,000 0 8,000 12,000 3,000 35,000 $ 10,000 80,000 Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid rent Professional library Accumulated depreciation—Professional library Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees Common stock Retained earnings Dividends Tuition fees earned Training fees earned Depreciation expense-Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals 15,000 26,000 0 12,500 10,000 80,000 50,000 123,900 40,000 0 0 50,000 0 33,000 0 6,000 6,400 $317,400 $317,400
Required 1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance. 2. Prepare the necessary adjusting journal entries for items a through h and post them to the T-accounts. Assume that adjusting entries are made only at year-end. 3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance. 4. Prepare Wells Technical Institute’s income statement and statement of retained earnings for the year and prepare its balance sheet as of December 31. The Retained Earnings account balance was $80,000 on December 31 of the prior year. Check (2 e) Cr. Training Fees Earned, $5,000 (21) Cr. Tuition Fees Earned, $7,500 (3) Adj. trial balance totals, $345,700 (4) Net income, $49,600
Answer
1&3) Unadj. bal. Adj. bal. Cash $34,000 $40,000 Unadj. bal. Adj. bal. Professional Library $35,000 35,000 Salaries Not Payable bal. 8) Adj. bal. $0 $400 $400 Unadj. bal. a) Adj. bal. Accounts Receivable $0 $7500 $7500 Accumulated depreciation – Professional Library Unadj. bal. $10,000 d) $7,200 Adj. bal. $17,200 e – Unearned Training Fees $5,000 Unadj. bal. $12,500 Adj. bal. $7,500 Teaching Materials $8,000 b) $2.800 Unadj. bal. Adj. bal. $5,200 Unadj. bal. Adj. bal. Equipment $80,000 $80,000 Unadj. bal. Adj. bal. $10,000 $10,000 Accumulated depreciation – Equipment unadj. bal. $15,000 C) $13,200 Adj. bal. $28,200 Prepaid insurance $12,000 a) $9,000. Retained earnings Unadj. bal. Adj. bal. $80,000 $80,000 Unadj. bal. Adj. bal. $2,400 Prepaid Rent $3,000 (h) $0 Unadj. bal. Adj. bal. Dividends $50,000 50k Accounts Not Payable bal. Adj. bal. Unadj. bal. Adj. bal. $3,000 $26,000 $26,000
Unadjusted Tution Fees bal. $123,900 a) $7,500 Adj. bal. $131,400 Unadj. bal. b) Adj. bal. Teaching Supplies Expense $0 5 200 $5 200 Training Fees Unadj. bal. $40,000 e) $5,000 Adj. bal. $45,000 Unadj. bal. h) Adj. bal. Rent expense $33,000 $3,000 36,000 Depreciation Expenses – Prof. Library unadj. bal. $0 d) $7,200 Adi. bal. $7,200 Unadj. bal. Adj. bal. Advertising Expense $6,000 Unadj. bal. Adj. bal. Utilities Expense $6.400 $6.400 Equipment Depreciation Expense – Unadj. bal. $0 c) $13,200 Adj. bal. $13,200 Unadi. bal. a) Adj. bal. Insurance expense SO $2.400 $2.400 Unadj. bal. Salaries Expense $50,000 $400 $50,400 Adj. bal.
2) Adjusting Entries – CREDIT EVENT a. DATE Dec. 31, DEBIT $2.400 $2.400 b. Dec. 31, $5,200 [$8000-$2800] $5,200 C) Dec. 31, $13,200 $13,200 TITLES Insurance Expense Prepaid insurance Teaching Supplies Expense Teaching Materials Depreciation Equipment Expense – Prof. Library Training Revenue Accounts Received Tuition Revenue Salaries Expense Rent Expense Rent $7,200 h) $3,000
4A) CREDIT DISCLOSURE $34,000 $2,800 $35,000 $176,000.400 WELLSTECHNICALINSTITUTE Income Statement for the Year Ended Dec 31. Tution fees earned $131.400 Training fees earned $45,000 $45,000 Cash accounts Receivable Teaching supplies perpaid insurance Professional library equipment accrued depreciation–Equipment accounts payable salaries Unearned training fees Common stock Retained earnings Dividends Tution fee Earned Training fees Earned Depreciation Feestututrial Expenses,600 $6,400 $65,200 $345,700 $345,700 $345,700 $3455,400 $6,700 $345,700 $34,400 $5,800 $34,400 $5,400 $6,400 $6,400 $6,400 $6,800 $34,400,400,800,600 $49,800,800,700,600 $6,700,700,700,600 $79,700,800
4C) Current Assets: Cash Teaching Supplies Perpaid Insurance Total Liabilities: $53,900 Shareholders Equity: $35,000 Common Stock $10,000 –$17,200 $17.800 Retained Earnings $79,000. $80,000 Total Liabilities and Shareholders Equity $33,900 $89.600 $123,500
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