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Wells Technical Institute (WTI), a school owned by Tristana Wells, provides tralning to Individuals who pay tultion directly to the school. WTI also offers training to groups In off-site locations. Its unadjusted trial balance as of December 31, 2015, follows. WTI Initially records prepald expenses and unearned revenues In balance sheet accounts. Descriptions of items a through h that requlre adjusting entries on December 31, 2015, follow Additional Information Items a. An analysls of WTI’s Insurance policles shows that $2,400 of coverage has explred. b. An Inventory count shows that teaching supples costing $2,800 are avallable at year-end 2015 C. Annual depreclation on the equipment is $13,200. d. Annual depreclation on the professlonal library Is $7,200. e. On November 1, WTI agreed to do a special six-month course (starting Immedlately) for a client. The contract calls for a monthly fee of $2,500, and the client pald the first five months’ fees in advance. When the cash was recelved, the Unearned Tralning Fees account was credited. The fee for the sixth month wll be recorded when It Is collected In 2016 f On October 15, WTI agreed to teach a four-month class (beginning Immediately) for an Individual for $3,000 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been recelved. (WTI’s accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.) g. WTI’s two employees are pald 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 Prepald Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2015 Credit Debit 34,000 0 8,000 12,000 3,000 35,000 Cash Accounts recelvable Teaching supples Prepald Insurance Prepald rent Professlonal library Accumulated depreciation-Professlonal library Equipment Accumulated depreclation-Equlpment Accounts payable Salaries payable Unearned tralning fees Common stock Retalned earnings Dividends Tultion fees earned Tralning fees earned Depreclation expense Professlonal library Depreclation expense Equlpment Salarles expense Insurance expense Rent expense Teaching supplles expense Advertising expense Utilities expense $ 10,000 80,000 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 Totals 317,400 317,400
Expert Answer
1. Journal
| No. | Account Name | Debit | Credit |
| a. | Insurance expense | $2400 | |
| Prepaid insurance | $2400 | ||
| (To record the expiry of prepaid insurance) | |||
| b. | Supplies expense | 5200 | |
| Supplies | 5200 | ||
| (To record the supplies expense) | |||
| c. | Depreciation expense | 13200 | |
| Accumulated depreciation-Equipment | 13200 | ||
| (To record depreciation on equipment) | |||
| d. | Depreciation expense | 7200 | |
| Accumulated depreciation-Professional library | 7200 | ||
| (To record depreciation on Professional library) | |||
| e. | Unearned training fee | 2500 | |
| Training fees earned | 2500 | ||
| (To record training fees earned) | |||
| f. | Accounts receivable | 7500 | |
| Tuition fees earned | 7500 | ||
| (To record tuition fees earned for 2.5 months) | |||
| g. | Salaries expense (2 x 2 days x $100) | 400 | |
| Salaries payable | 400 | ||
| (To record salarie due) | |||
| h. | Rent expense | 3000 | |
| Prepaid Rent | 3000 | ||
| (To record rent expense for December) |
2. Adjusted Trial Balance
| Debit | Credit | |
| Cash | $34000 | |
| Accounts receivable | 7500 | |
| Teaching supplies | 2800 | |
| Prepaid Insurance | 9600 | |
| Prepaid rent | 0 | |
| Professional library | 35000 | |
| Accumulated depreciation – Professional library | $17200 | |
| Equipment | 80000 | |
| Accumulated depreciation – Equipment | 28200 | |
| Accounts payable | 26000 | |
| Salaries payable | 400 | |
| Unearned training fees | 10000 | |
| Common stock | 10000 | |
| Retained earnings | 80000 | |
| Dividends | 50000 | |
| Tuition fees earned | 131400 | |
| Training fees earned | 42500 | |
| Depreciation expense – Professional library | 7200 | |
| Depreciation expense – Equipment | 13200 | |
| Salaries expense | 50400 | |
| Insurance expense | 2400 | |
| Rent expense | 36000 | |
| Teaching supplies expense | 5200 | |
| Advertising expense | 6000 | |
| Utilities expense | 6400 | |
| Total | $345700 | $345700 |
3.
Income statement
| Revenues: | ||
| Tuition fees earned | $131400 | |
| Training fees earned | 42500 | |
| Total revenue | $173900 | |
| Expenses: | ||
| Depreciation expense – Professional library | $7200 | |
| Depreciation expense – Equipment | 13200 | |
| Salaries expense | 50400 | |
| Insurance expense | 2400 | |
| Rent expense | 36000 | |
| Teaching supplies expense | 5200 | |
| Advertising expense | 6000 | |
| Utilities expense | 6400 | |
| Total expenses | $126800 | |
| Net income | $47100 | |
4. Statement of retained earnings
| Retained earnings, December 31, 2014 | $80000 |
| Add: Net income | 47100 |
| 127100 | |
| Less: Dividends | -50000 |
| Retained earnings, December 31, 2015 | $77100 |
