Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial
ID: 2393581 • 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 athrough h that require adjusting entries on December 31, 2017, follow.
Additional Information Items
An analysis of WTI's insurance policies shows that $4,129 of coverage has expired.
An inventory count shows that teaching supplies costing $3,578 are available at year-end 2017.
Annual depreciation on the equipment is $16,515.
Annual depreciation on the professional library is $8,258.
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 $5,520 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 $ 26,642 Accounts receivable 0 Teaching supplies 10,245 Prepaid insurance 15,371 Prepaid rent 2,050 Professional library 30,739 Accumulated depreciation—Professional library $ 9,223 Equipment 71,718 Accumulated depreciation—Equipment 16,396 Accounts payable 35,159 Salaries payable 0 Unearned training fees 13,000 T. Wells, Capital 65,169 T. Wells, Withdrawals 40,988 Tuition fees earned 104,516 Training fees earned 38,937 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 49,186 Insurance expense 0 Rent expense 22,550 Teaching supplies expense 0 Advertising expense 7,173 Utilities expense 5,738 Totals $ 282,400 $ 282,400
Explanation / Answer
WELLS TECHNICAL INSTITUTE T-accounts adjusted Trial Balance 31-Dec-17 Cash Equipment Debit Credit Unadj bal 26,642 Unadj bal 71,718 Cash 26,642 Accounts receivable 13800 adj bal 26,642 adj bal 71,718 Teaching supplies 3,578 Prepaid insurance 11242 Prepaid rent 0 Accounts receivable Professional library 30,739 Unadj bal 0 Accumulated depreciation—Equipment Accumulated depreciation—Professional library 17,481 13800 Unadj bal 16,396 Equipment 71,718 adj bal 13800 16515 Accumulated depreciation—Equipment 32,911 adj bal 32,911 Accounts payable 35,159 Salaries payable 400 Teaching supplies Accounts payable Unearned training fees 7,800 Unadj bal 10,245 Unadj bal 35,159 T. Wells, Capital 65,169 6667 T. Wells, Withdrawals 40,988 adj bal 3578 adj bal 35,159 Tuition fees earned 118316 Training fees earned 44137 Prepaid insurance Salaries payable Depreciation expense—Professional library 8258 Unadj bal 15,371 Unadj bal 0 Depreciation expense—Equipment 16515 4129 400 Salaries expense 49586 adj bal 11242 adj bal 400 Insurance expense 4129 Rent expense 24600 Prepaid rent Unearned training fees Teaching supplies expense 6667 Unadj bal 2,050 Unadj bal 13,000 Advertising expense 7,173 2,050 5200 Utilities expense 5,738 adj bal 0 adj bal 7800 Totals 321,373 321,373 Professional library T. Wells, Capital Unadj bal 30,739 Unadj bal 65,169 adj bal 30,739 adj bal 65,169 Accumulated depreciation—Professional library T. Wells, Withdrawals Unadj bal 9,223 Unadj bal 40,988 8258 adj bal 17,481 adj bal 40,988 Tuition fees earned Insurance expense Unadj bal 104,516 Unadj bal 0 13800 4129 adj bal 118316 adj bal 4129 Training fees earned Rent expense Unadj bal 38,937 Unadj bal 22,550 5200 2050 adj bal 44137 adj bal 24600 Depreciation expense—Professional library Teaching supplies expense Unadj bal 0 Unadj bal 0 8258 6667 adj bal 8258 adj bal 6667 Depreciation expense—Equipment Advertising expense Unadj bal 0 Unadj bal 7,173 16515 adj bal 16515 adj bal 7,173 Salaries expense Utilities expense Unadj bal 49,186 Unadj bal 5,738 400 adj bal 49586 adj bal 5,738
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