Chapter 3: Q3PSA_2 (page 151)
Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals whopay tuition directly to the school. WTI also offers training to groups in off-site locations. Its unadjustedtrial balance as of December 31, 2017, follows. Descriptions of items athrough hthat require adjustingentries on December 31, 2017, follow.
Additional Information Items
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 2017.
c. Annual depreciation on the equipment is \(13,200.
d. Annual depreciation on the professional library is \)7,200.
e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. Thecontract calls for a monthly fee of \(2,500, and the client paid the first five months’ fees in advance.
When the cash was received, the Unearned Training Fees account was credited. The fee for the sixthmonth will be recorded when it is collected in 2018.
f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for\)3,000 tuition per month payable at the end of the class. The class started on October 15, but no paymenthas yet been received. (WTI’s accruals are applied to the nearest half-month; for example,
October recognizes one-half month accrual.)
g. WTI’s two employees are paid weekly. As of the end of the year, two days’ salaries have accrued at the
rate of \(100 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.
A B C
WELLS TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31, 2017
Cash
Accounts receivable
Teaching supplies
Prepaid insurance
Prepaid rent
Professional library
Accumulated depreciation—Professional library
Equipment
Accumulated depreciation—Equipment
Accounts payable
Salaries payable
Unearned training fees
Tuition fees earned
Training fees earned
Depreciation expense—Professional library
Depreciation expense—Equipment
Salaries expense
Insurance expense
Rent expense
Teaching supplies expense
Advertising expense
Utilities expense
Totals
Common stock
Retained earnings
1
2
3
4
5
6
7
8
9
10
11
12
15
16
17
18
19
20
21
22
23
24
25
26
27
28
13
14
Debit
\) 34,000
8,000
12,000
3,000
35,000
80,000
50,000
80,000
50,000
33,000
6,000
6,400
\(317,400
Credit
\)317,400
$ 10,000
15,000
26,000
12,500
10,000
123,900
40,000
Dividends
Required
1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items athrough hand 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
2017 and prepare its balance sheet as of December 31, 2017.
Short Answer
Rent Expense account Debited with $3,000.
Step by step solution
Over 22 million students worldwide already upgrade their learning with Vaia!
