Financial Statements P1 P2 Fau Preparing Adjustin

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Financial Statements P1 P2 Fau Preparing Adjustin

Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements P1 P2 P3 P4 P6

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 follows, along with descriptions of items a through h that require adjusting entries on December 31.

Additional Information

  1. An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired.
  2. An inventory count shows that teaching supplies costing $2,800 are available at year-end.
  3. Annual depreciation on the equipment is $13,200.
  4. Annual depreciation on the professional library is $7,200.
  5. On September 1, WTI agreed to do five courses for a client for $2,500 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 $12,500 cash in advance for all five courses on September 1, and WTI credited Unearned Training Fees.
  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, $7,500 of the tuition has been earned by WTI.
  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.
  8. The balance in the Prepaid Rent account represents rent for December.Page 117

Required

  1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.Check (2e) Cr. Training Fees Earned, $5,000
  2. Prepare the necessary adjusting journal entries for items a through h and post them to the T-accounts. Assume that adjusting entries are made only at year-end.(2f) Cr. Tuition Fees Earned, $7,500
  3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.(3) Adj. trial balance totals, $345,700
  4. Prepare Wells Technical Institute’s income statement and statement of owner’s equity for the year and prepare its balance sheet as of December 31. The T. Wells, Capital account balance was $90,000 on December 31 of the prior year.(4) Net income, $49,600