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. Descriptions of items athrough hthat require adjusting entries 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. 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 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 therate 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

The total assets are $123,500.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of income statement

Income statement is the statement shows the income earned by the company in a particular period.

Income Statement

Income Statement
Year ending December 31, 2017
Tuition Fees Earned	$131,400
Training Fees Earned	$45,000
Total Income		$176,400
Less:
Depreciation Expense- Professional Library	$7,200
Depreciation Expense- Equipment	$5,200
Salaries Expense	$50,400
Insurance Expense	$2,400
Rent Expense	$36,000
Teaching Supplies Expense	$13,200
Advertising Expense	$6,000
Utilities Expense	$6,400	$126,800
Net Income		$49,600

Statement of retained earnings

Statement of Retained Earnings
For Year Ending December 31, 2017
Beginning Balance	$80,000
Net Income	$49,600
Dividends	$50,000
Retained Earnings	$79,600

Balance Sheet

Balance Sheet
For the year ending December 31, 2017
Assets
Current Assets:
Cash	$34,000
Accounts Receivable	$7,500
Teaching Supplies	$2,800
Prepaid Insurance	$9,600
Prepaid Rent	$0
Non-Current Assets
Equipment	$80,000
Accumulated Depreciation	-$28,200
Professional Library	$35,000
Accumulated Depreciation	$17,200
Total Assets		$123,500
Liabilities
Current Liabilities
Accounts Payable	$26,000
Salaries Payable	$400
Unearned Training Fees	$7,500
Stockholder’s Equity
Common Stock	$10,000
Retained Earnings	$79,600
Total liabilities & Stockholder’s Equity		$123,500