PacRim Careers provides training to individuals who pay tuition directly to the business. The business also offers extension training to groups in off-site locations. Additional information available at the December 31, 2014, year-end follows:
a. An analysis of the company's policies shows that $1,250 of insurance coverage has expired.
b. An inventory shows that teaching supplies costing $450 are on hand at the end of the year.
c. The estimated annual depreciation on the equipment is $8,000.
d. The estimated annual depreciation on the professional library is $4,500.
e. The school offers off-campus services for specific employers. On November 1, the company agreed to do a special six-month course for a client. The contract calls for a monthly fee of $950, and the client paid the first five months' fees in advance. When the cash was received, the Unearned Extension Fees account was credited.

f. On October 15, the school agreed to teach a four-month class for an individual for $1,200 tuition per month payable at the end of the class. The services to date have been provided as agreed, but no payment has been received.
g. The school's two employees are paid weekly. As of the end of the year, three days' wages have accrued at the rate of $120 per day for each employee.
h. The balance in the Prepaid Rent account represents the rent for three months: December, January, and February.

Required
1. Prepare the necessary annual adjusting journal entries at December 31, 2014, based on (a) to (h) above.
Analysis Component:
2. Refer to the format presented in Exhibit 3.22 and complete the adjusted trial balance using the information in (a) through (h) above.
3. If the adjustments were not recorded, calculate the over- or understatement of income.
4. Is it ethical to ignore adjusting entries?

Transcribed Image Text:

PacRim Careers Trial Balances.x 8 PacRim Careers Trial Balances December 31. 2014 Unadjusted Trial Balance Dr. Adjustments Dr. Adjusted Trial Balance Account Cr. Cr. 7 Cash 8 Accounts receivable 9 Teaching supplies 10 Prepaid imurance 11 Prepaid rent 12 Professional library 18,000 6,500 1,400 7,200 60,000 professional library s 18,000 14 Equipment 96,000 32,000 2,500 16 Accounts payable 17 Salaries payable 18 Unearned extension fees 19 Karoo Ashevak, capital 20 Karoo Ashevak, withdrawals 21 Tuition fees earned 22 Extension fees earned 23 Depreciation expense, equipment 24 Depreciation expense, 6,300 229,000 92,000 196,000 72,500 professional library 25 Salaries expense 26 Insurance expense 27 Rent expense 28 Teaching supplies expense 29 Advertising expense 30 Utilities expense 31 Totals 206,000 44,000 14,000 11,200 556,300 5 556,300