Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO P1, P2, P3

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO 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, 2015, 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, 2015, follow.

 

Additional Information Items
a. An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,800 are available at year-end 2015.
c. Annual depreciation on the equipment is $13,200.
d. Annual depreciation on the professional library is $7,200.
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 $2,500, 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 2016.
f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,000 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 $100 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, 2015
  Debit   Credit
  Cash $ 34,000
  Accounts receivable 0
  Teaching supplies 8,000
  Prepaid insurance 12,000
  Prepaid rent 3,000
  Professional library 35,000
  Accumulated depreciation—Professional library $ 10,000
  Equipment 80,000
  Accumulated depreciation—Equipment 15,000
  Accounts payable 26,000
  Salaries payable 0
  Unearned training fees 12,500
  Common stock 10,000
  Retained earnings 80,000
  Dividends 50,000
  Tuition fees earned 123,900
  Training fees earned 40,000
  Depreciation expense—Professional library 0
  Depreciation expense—Equipment 0
  Salaries expense 50,000
  Insurance expense 0
  Rent expense 33,000
  Teaching supplies expense 0
  Advertising expense 6,000
  Utilities expense 6,400
  Totals $ 317,400 $ 317,400

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