Digital Learning, Inc. provides computer training to outside individuals and groups. Tuition is paid directly to the
Question:
Digital Learning, Inc. provides computer training to outside individuals and groups. Tuition is paid directly to the school. The school's unadjusted trial balance for the year ended December 31, 2012 is shown in the table below. Digital Learning, Inc. initially records its prepaid expenses and unearned income in balance sheet accounts. Adjusting entries must be made by December 31 for each of the following items (1 through 8).
1. A review of the school's insurance policies found that the $2,800 coverage has expired.
2. A 2012 year-end inventory shows available teaching materials costing $2,450 remaining in stock.
3. The annual depreciation of the school's equipment is $11,000.
4. The annual depreciation of the school professional library is $6,250.
5. At the request of a client, the school held a special six-month course, starting on November 1. The school charged the client a monthly fee of $1,800. The first five months were paid in advance. Upon receipt of the cash payment, the school credited the Unearned Training Fees account. The school will record the sixth month's fee when it is collected in 2013.
6. The school conducted a four-month course for one student, beginning October 15, for a monthly fee of $2,500, payable upon completion of the course. As of December 31, no payments have been received. Accruals are applied to the nearest half month.
7. The school pays its three employees weekly. As of December 31, two days of salary have been accrued for each employee at a rate of $125 per day.
8. The balance of the Prepaid Rent account represents the rent for December.
DIGITAL LEARNING, INC. Unadjusted Trial Balance December 31, 2012 | ||
---|---|---|
Debit | Credit | |
Money | $24,500 | |
receivable | 0 | |
teaching materials | 8,000 | |
prepaid insurance | 16,000 | |
prepaid rent | 2,200 | |
professional library | 28,000 | |
Accumulated Depreciation—Professional Library | $8,500 | |
Equipment | 68,000 | |
Accumulated Depreciation—Equipment | 16,500 | |
Accounts payable | 35,100 | |
Salaries to pay | 0 | |
Unearned training fees | 10,500 | |
Common actions | 11,000 | |
Retained earnings | 52,900 | |
dividends | 42,000 | |
Earned Tuition Fees | 103,900 | |
Training Fees Earned | 38,500 | |
Depreciation Expense—Professional Library | 0 | |
Depreciation Expense—Equipment | 0 | |
salary expenses | 52,000 | |
insurance costs | 0 | |
Rental costs | 24.800 | |
Didactic material expenses | 0 | |
advertising expenses | 6,000 | |
Public service spending | 5,400 | _______ |
Totals | $276,900 | $276,900 |
1.Prepare T-accounts for Digital Learning, Inc. Use unadjusted trial balance balances.
2. Prepare the adjusting journal entries for items 1 through 8 and post them to the T accounts.
3. Update T-account balances for adjusting entries and prepare an adjusted trial balance.
4. Prepare the income statement and statement of retained earnings for Digital Learning for 2012. Prepare a balance sheet as of December 31, 2012.
Fundamental Accounting Principles
ISBN: 978-0071051507
Volume I, 14th Canadian Edition
Authors: Larson Kermit, Tilly Jensen