Answer:
a. An analysis of WTI's insurance policies shows that $2,400 of coverage has expired.
Dr Insurance expense 2,400
Cr Prepaid insurance 2,400
b. An inventory count shows that teaching supplies costing $2,800 are available at year-end.
Dr Teaching supplies expense 5,200
Cr Teaching supplies 5,200
c. Annual depreciation on the equipment is $13,200.
Dr Depreciation expense 13,200
Cr Accumulated depreciation: equipment 13,200
d. Annual depreciation on the professional library is $7,200.
Dr Depreciation expense 7,200
Cr Accumulated depreciation: professional library 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.
Dr Unearned training fees 5,000
Cr Training fees earned 5,000
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.)
Dr Accounts receivable 4,500
Cr Tuition fees earned 4,500
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.
Dr Salaries expense 400
Cr Salaries payable 400
h. The balance in the Prepaid Rent account represents rent for December.
Dr Rent expense 3,000
Cr Prepaid rent 3,000
Wells Technical Institute (WTI)
Adjusted Trial Balance
Debit Credit
Cash $34,000
Accounts receivable $4,500
Prepaid rent $0
Teaching supplies $2,800
Prepaid insurance $9,600
Professional library $35,000
Accumulated depreciation: $10,000
Professional library
Equipment $80,000
Accumulated depreciation: $22,200
Equipment
Accounts payable $39,200
Salaries payable $400
Unearned training fees $7,500
Common stock $10,000
Retained earnings $80,000
Dividends $50,000
Tuition fees earned $128,400
Training fees earned $45,000
Depreciation expense: $7,200
Professional library
Depreciation expense: $13,200
Equipment
Salaries expense $50,400
Insurance expense $2,400
Rent expense $36,000
Teaching supplies expense $5,200
Advertising expense $6,000
Utilities expense <u> $6,400 </u> <u> </u>
Totals $342,700 $342,700
Wells Technical Institute (WTI)
Income Statement
For the year ended December 31, 2016
Revenue:
-
Tuition fees earned $128,400
- Training fees earned $45,000 $173,400
Operating expenses:
- Depreciation expense $20,400
- Salaries expense $50,400
- Insurance expense $2,400
- Rent expense $36,000
- Teaching supplies expense $5,200
- Advertising expense $6,000
- Utilities expense $6,400 <u>($126,800)
</u>
Operating income $46,600
Wells Technical Institute (WTI)
Balance Sheet
For the year ended December 31, 2016
Assets:
Cash $34,000
Accounts receivable $4,500
Teaching supplies $2,800
Prepaid insurance $9,600
Professional library, net $25,000
Equipment, net $57,800
Total assets $133,700
Liabilities:
Accounts payable $39,200
Salaries payable $400
Unearned training fees $7,500
Total liabilities $47,100
Stockholders' Equity:
Common stock $10,000
Retained earnings $76,600
Total stockholders' Equity <u>$86,600</u>
Total liabilities and equity $133,700
Wells Technical Institute (WTI)
Statement of Retained Earnings
For the year ended December 31, 2016
Beginning balance January 1, 2016 $80,000
Net income <u>$46,600</u>
Subtotal $126,600
Dividends <u>($50,000)
</u>
Ending balance December 31, 2016 $76,600
