Question

Wells Teaching Institute (WTI), a school owned by Tracey 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, 2011, 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, 2011, follow.
Additional Information Items
a. An analysis of the school’s insurance policies shows that $3,000 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,000 are available at year-end 2011.
c. Annual depreciation on the equipment is $10,000.
d. Annual depreciation on the professional library is $5,000.
e. On November 1, the school 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 earned and collected in 2012.
f. On October 15, the school agreed to teach a four-month class (beginning immediately) for an individual for $1,600 tuition per month payable at the end of the class. The services are being provided as agreed, and no payment has yet been received.
g. The school’s two employees are paid weekly. As of the end of the year, two days’ salaries have accrued at the rate of $120 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.
Wells Teaching Institute
Unadjusted Trial Balance
December 31, 2011
Required
1. For accounts listed in the unadjusted trial balance, prepare T-accounts (representing the ledger) and enter the unadjusted balances.
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.
3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trial balance.
4. Prepare Wells Teaching Institute’s income statement and statement of retained earnings for the year 2011and prepare its balance sheet as of December 31, 2011.


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  • CreatedMarch 18, 2015
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