Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial
ID: 2332862 • Letter: P
Question
Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3
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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. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2017, follow.
Additional Information Items
An analysis of WTI's insurance policies shows that $2,542 of coverage has expired.
An inventory count shows that teaching supplies costing $2,204 are available at year-end 2017.
Annual depreciation on the equipment is $10,170.
Annual depreciation on the professional library is $5,085.
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 $2,600, 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 sixth month will be recorded when it is collected in 2018.
On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $2,399 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
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.
The balance in the Prepaid Rent account represents rent for December.
Problem 3-3A Part 2
2-a. Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts.
2-b. Prepare an adjusted trial balance.
Unadjusted Trial Balance
December 31, 2017 Debit Credit Cash $ 28,000 Accounts receivable 0 Teaching supplies 10,768 Prepaid insurance 16,155 Prepaid rent 2,155 Professional library 32,307 Accumulated depreciation—Professional library $ 9,693 Equipment 75,368 Accumulated depreciation—Equipment 17,232 Accounts payable 37,613 Salaries payable 0 Unearned training fees 13,000 T. Wells, Capital 68,493 T. Wells, Withdrawals 43,078 Tuition fees earned 109,846 Training fees earned 40,923 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 51,694 Insurance expense 0 Rent expense 23,705 Teaching supplies expense 0 Advertising expense 7,539 Utilities expense 6,031 Totals $ 296,800 $ 296,800
Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. a Insurance Expenses 2,542.00 Prepaid Insurance 2,542.00 (record the insurance expenses) b Teaching Supplies Expense 8,564.00 $10,768 - $2,204 Teaching Supplies 8,564.00 (record the teaching supplies expenses) c Depreciation Expense - Equipment 10,170.00 Accumulated Dep. - Equipment 10,170.00 (record the depreciation expense- equip.) d Depreciation Expense - Professional Library 5,085.00 Accumulated Dep. - Professional Library 5,085.00 (record the dep. expense- professional library) e Unearned Training Fees 5,200.00 $2,600 X 2 Month Training Fees Earned 5,200.00 (record the training fees earned) f Accounts Receivable 5,997.50 $2,399 X 2.50 Months Tution Fees Earned 5,997.50 (record the tution fees earned) g Salaries Expense 400.00 2 Days X 2 Employees X $100 Salaries Payable 400.00 (record the salaries expense) h Rent Expense 2,155.00 Prepaid Rent 2,155.00 (record the rent expense) Answer 2-a. Cash Accounts Receivable Teaching Supplies Bal. 28,000.00 Bal. - Bal. 10,768.00 8,564.00 b f 5,997.50 End. Bal. 28,000.00 End. Bal. 5,997.50 End. Bal. 2,204.00 Prepaid Insurance Prepaid Rent Professional Liabrary Bal. 16,155.00 2,542.00 a Bal. 2,155.00 2,155.00 h Bal. 32,307.00 End. Bal. 13,613.00 End. Bal. - End. Bal. 32,307.00 Accumulated Dep. - Professional Liabrary Equipment Accumulated Dep. - Equipment Bal. 9,693.00 Bal. 75,368.00 Bal. 17,232.00 5,085.00 d - 10,170.00 c End. Bal. 14,778.00 End. Bal. 75,368.00 End. Bal. 27,402.00 Accounts Payable Salaries Payable Unearned Training Fees Bal. 37,613.00 Bal. - Bal. 13,000.00 400.00 g e 5,200.00 End. Bal. 37,613.00 End. Bal. 400.00 End. Bal. 7,800.00 T.Wells, Capital T.Wells, Withdrawals Bal. 68,493.00 Bal. 43,078.00 End. Bal. 68,493.00 End. Bal. 43,078.00 Tution Fees Earned Training Fees Earned Dep. Expense - Professional Liabrary Bal. 109,846.00 Bal. 40,923.00 Bal. - 5,997.50 f 5,200.00 e d 5,085.00 End. Bal. 115,843.50 End. Bal. 46,123.00 End. Bal. 5,085.00 Dep. Expense - Equipment Salaries Expense Insurance Expense Bal. - Bal. 51,694.00 Bal. - c 10,170.00 g 400.00 a 2,542.00 End. Bal. 10,170.00 End. Bal. 52,094.00 End. Bal. 2,542.00 Rent Expense Teaching Supplies Expense Advertising Expense Bal. 23,705.00 Bal. - Bal. 7,539.00 h 2,155.00 b 8,564.00 End. Bal. 25,860.00 End. Bal. 8,564.00 End. Bal. 7,539.00 Utilities Expense Bal. 6,031.00 End. Bal. 6,031.00 Answer 2-b. Well Technical Institute Adjusted Trial Balance As at Dec 31, 2017 Accounts Title Debits Credits Cash 28,000.00 Accounts Receivable 5,997.50 Teaching Supplies 2,204.00 Prepaid Insurance 13,613.00 Prepaid Rent - Professional Liabrary 32,307.00 Accumulated Dep. - Professional Liabrary 14,778.00 Equipment 75,368.00 - Accumulated Dep. - Equipment 27,402.00 Accounts Payable 37,613.00 Salaries Payable 400.00 Unearned Training Fees 7,800.00 T.Wells, Capital 68,493.00 T.Wells, Withdrawals 43,078.00 Tution Fees Earned 115,843.50 Training Fees Earned 46,123.00 Dep. Expense - Professional Liabrary 5,085.00 Dep. Expense - Equipment 10,170.00 Salaries Expense 52,094.00 Insurance Expense 2,542.00 Rent Expense 25,860.00 Teaching Supplies Expense 8,564.00 Advertising Expense 7,539.00 Utilities Expense 6,031.00 Total 318,452.50 318,452.50
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