Wells Technical Institute (WTI)_Adjusting entries and Financial statements

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, 2013, 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, 2013, follow.

Additional Information Items

a.

An analysis of WTI's insurance policies shows that $3,350 of coverage has expired.

b.

An inventory count shows that teaching supplies costing $3,750 are available at year-end 2013.

c.

Annual depreciation on the equipment is $15,100.

d.

Annual depreciation on the professional library is $9,100.

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 $4,400, 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 2014.

f.

On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,900 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.)

g.

WTI's two employees are paid weekly. As of the end of the year, two days' salaries have accrued at the rate of $290 per day for each employee.

h.

The balance in the Prepaid Rent account represents rent for December.

WELLS TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31, 2013

  Debit

  Credit

  Cash

$

53,000     

  Accounts receivable

0     

  Teaching supplies

9,900     

  Prepaid insurance

13,900     

  Prepaid rent

4,900     

  Professional library

54,000     

  Accumulated depreciation—Professional library

$

11,900   

  Equipment

99,000     

  Accumulated depreciation—Equipment

16,900   

  Accounts payable

 46,900   

  Salaries payable

0   

  Unearned training fees

22,000   

  Common stock

29,000   

  Retained earnings

99,000   

  Dividends

69,000     

  Tuition fees earned

146,700   

  Training fees earned

59,000   

  Depreciation expense—Professional library

0     

  Depreciation expense—Equipment

0     

  Salaries expense

69,000     

  Insurance expense

0     

  Rent expense

42,500     

  Teaching supplies expense

0     

  Advertising expense

7,900     

  Utilities expense

8,300     

  Totals

      $

431,400     

$

431,400  

2.

Prepare the necessary adjusting journal entries for items a through h

Post the entries in T- Accounts

Prepare Adjusted Trial Balance

Prepare Income Statement, Statement of retained earnings, Balance Sheet