Following is the unadjusted trial balance for Augustus Institute as of December 31, 2013, which initially records prepaid expenses and unearned revenues in balance sheet accounts. The Institute provides one-on-one training to individuals who pay tuition directly to the business and offers extension training to groups in off-site locations. Shown after the trial balance are items a through h that require adjusting entries as of December 31, 2013.

Additional Information Items
a. An analysis of the Institute€™s insurance policies shows that $9,500 of coverage has expired.
b. An inventory count shows that teaching supplies costing $20,000 are available at year-end 2013.
c. Annual depreciation on the equipment is $5,000.
d. Annual depreciation on the professional library is $2,400.
e. On November 1, the Institute agreed to do a special five-month course (starting immediately) for a client. The contract calls for a $14,300 monthly fee, and the client paid the first two months€™ fees in advance. When the cash was received, the Unearned Training Fees account was credited. The last two month€™s fees will be recorded when collected in 2014.
f. On October 15, the Institute agreed to teach a four-month class (beginning immediately) to an individual for $2,300 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (The Institute€™s accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
g. The Institute€™s only employee is paid weekly. As of the end of the year, three days€™ salaries have accrued at the rate of $150 per day.
h. The balance in the Prepaid Rent account represents rent for December.

Required
1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
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 the company€™s income statement and statement of owner€™s equity for the year 2013, and prepare its balance sheet as of December 31,2013.

Transcribed Image Text:

AUGUSTUS INSTITUTE Unadjusted Trial Balance December 31, 2013 Debit Credit Cash Accounts receivable Teaching supplies Prepaid insurance Prepaid remt Professional library Accumulated depreciation Professional library Equipment Accumulated depreciation-Equipment Accounts payable Salaries payable Unearned training fees C. Augustus, Capital C. Augustus, Withdrawals Tuition fees earned Training fees earned Depreciation expense Professional library Depreciation expense-Equipment Salaries expense Insurance expense Rent expense Teaching supplies expense Advertising expense Utilities expense Totals $60,000 70,000 19,000 3,800 12,000 $ 2,500 40,000 20,000 11,200 28,600 71,500 20,000 129,200 68,000 0 44,200 29,600 0 19,000 13,400 $ 331,000 $331,000