Answer:
1. An analysis of WTI's insurance policies shows that $2,542 of coverage has expired.
Dr Insurance expense 2,542
Cr Prepaid insurance 2,542
2. An inventory count shows that teaching supplies costing $2,204 are available at year-end.
Dr Teaching supplies expense 8,158
Cr Teaching supplies 8,158
3. Annual depreciation on the equipment is $10,170.
Dr Depreciation expense 10,170
Cr Accumulated depreciation: equipment 10,170
4. Annual depreciation on the professional library is $5,085.
Dr Depreciation expense 5,085
Cr Accumulated depreciation: professional library 5,085
5. On September 1, WTI agreed to do five courses for a client for $2,400 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 $12,000 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
Dr Unearned training fees 4,800
Cr Training fees earned 4,800
6. 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, $6,498 of the tuition has been earned by WTI.
Dr Accounts receivable 6,498
Cr Tuition fees earned 6,498
7. 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.
Dr Salaries expense 400
Cr Salaries payable 400
8. The balance in the Prepaid Rent account represents rent for December.
Dr Rent expense 2,073
Cr Prepaid rent 2,073
Wells Technical Institute (WTI)
Adjusted Trial Balance
Debit Credit
Cash $26,944
Accounts receivable $6,498
Prepaid rent $0
Teaching supplies $2,204
Prepaid insurance $13,003
Professional library $31,088
Accumulated depreciation: $14,413
Professional library
Equipment $72,533
Accumulated depreciation: $26,752
Equipment
Accounts payable $37,202
Salaries payable $400
Unearned training fees $6,700
Common stock $11,000
Retained earnings $54,908
Dividends $41,452
Tuition fees earned $112,199
Training fees earned $44,179
Depreciation expense: $5,085
Professional library
Depreciation expense: $10,170
Equipment
Salaries expense $50,143
Insurance expense $2,542
Rent expense $24,876
Teaching supplies expense $8,158
Advertising expense $7,254
Utilities expense <u> $5,803 </u> <u> </u>
Totals $307,753 $307,753
a) Wells Technical Institute (WTI)
Income Statement
For the year ended December 31, 2018
Revenue:
-
Tuition fees earned $112,199
-
Training fees earned $44,179 $156,378
Operating expenses:
-
Depreciation expense $15,255
-
Salaries expense $50,143
-
Insurance expense $2,542
-
Rent expense $24,876
-
Teaching supplies expense $8,158
-
Advertising expense $7,254
-
Utilities expense $5,803 <u>($114,031)</u>
Operating income $42,347
b)Wells Technical Institute (WTI)
Balance Sheet
For the year ended December 31, 2018
Assets:
Cash $26,944
Accounts receivable $6,498
Teaching supplies $2,204
Prepaid insurance $13,003
Professional library, net $16,675
Equipment, net $45,781
Total assets $111,105
Liabilities:
Accounts payable $37,202
Salaries payable $400
Unearned training fees $6,700
Total liabilities $44,302
Stockholders' Equity:
Common stock $11,000
Retained earnings $55,803
Total stockholders' Equity <u>$66,803</u>
Total liabilities and equity $111,105
c)Wells Technical Institute (WTI)
Statement of Retained Earnings
For the year ended December 31, 2018
Beginning balance January 1, 2018 $54,908
Net income <u>$42,347</u>
Subtotal $97,255
Dividends <u> ($41,452
)</u>
Ending balance December 31, 2018 $66,803
