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. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Its unadjusted trial balance as of December 31 follows, along with descriptios of items a through h that require adjusting entries on December 31. Additional Information Items
An analysis of WTI's insurance policies shows that $3,600 of coverage has expired.
An inventory count shows that teaching supplies costing $3,120 are available at year-end.
Annual depreciation on the equipment is $14,400.
Annual depreciation on the professional library is $7,200.
On September 1, WTI agreed to do five courses for a client for $2,700 each. Two courses will start immediately and finish before the end of the year. Three courses will not begin until next year. The client paid $13,500 cash in advance for all five courses on September 1, and WTI credited Unearned Revenue.
On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $10,950 of the tuition revenue has been earned by WTI.
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.
WELLS TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31
Debit Credit
Cash $ 26,944
Accounts receivable 0
Teaching supplies 10,362
Prepaid insurance 15,545
Prepaid rent 2,073
Professional library 31,088
Accumulated depreciation—Professional library $ 9,328
Equipment 104,000
Accumulated depreciation—Equipment 16,582
Accounts payable 24,000
Salaries payable 0
Unearned revenue 13,500
Common stock 32,577
Retained earnings 76,000
Dividends 41,452
Tuition revenue 105,701
Training revenue 39,379
Depreciation expense—Professional library 0
Depreciation expense—Equipment 0
Salaries expense 49,743
Insurance expense 0
Rent expense 22,803
Teaching supplies expense 0
Advertising expense 7,254
Utilities expense 5,803
Totals $ 317,067 $ 317,067
3-a. Prepare Wells Technical Institute's income statement for the year.
3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $76,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.