Chapter 3: Q3PSB_2 (page 157)
Following is the unadjusted trial balance for Alonzo Institute as of December 31, 2017. The Institute provides
one-on-one training to individuals who pay tuition directly to the business and offers extension
training to groups in off-site locations. Shown after the trial balance are items athrough hthat require
adjusting entries as of December 31, 2017.
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
ALONZO 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
Common stock
Retained earnings
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
\(
\) 60,000
70,000
19,000
3,800
12,000
40,000
20,000
44,200
29,600
19,000
13,400
331,000
Debit
\(331,000
\) 2,500
20,000
11,200
28,600
11,000
60,500
129,200
68,000
Credit
Dividends
A B C
Additional Information Items
a. An analysis of the Institute’s insurance policies shows that \(9,500 of coverage has expired.
b. An inventory count shows that teaching supplies costing \)20,000 are available at year-end 2017.
c. Annual depreciation on the equipment is \(5,000.
d. Annual depreciation on the professional library is \)2,400.
e. On November 1, the Institute agreed to do a special five-month course (starting immediately) for aclient. The contract calls for a \(14,300 monthly fee, and the client paid the first two months’ fees inadvance. When the cash was received, the Unearned Training Fees account was credited. The lastthree months’ fees will be recorded when collected in 2018.
f. On October 15, the Institute agreed to teach a four-month class (beginning immediately) to an individualfor \)2,300 tuition per month payable at the end of the class. The class started on October 15,but no payment has yet been received. (The Institute’s accruals are applied to the nearest half-month;for example, October recognizes one-half month accrual.)
g. The Institute’s only employee is paid weekly. As of the end of the year, three days’ salary has accruedat the rate of $150 per day.
h. The balance in the Prepaid Rent account represents rent for December.
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 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 the company’s income statement and statement of retained earnings for the year 2017, and
prepare its balance sheet as of December 31, 2017.
Short Answer
Prepaid insurance account debited with $9,500.
Step by step solution
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