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Thursday, February 3, 2011

Wells Teaching Institute

Solution is available here for U$10.00

Accounting: Problem 3-3A
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, 2009, 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, 2009, 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 2009.
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 collected in 2010.
f.
On October 15, the school agreed to teach a four-month class (beginning immediately) to an individual for $1,600 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (Accrual can begin at the nearest half-month; for example, October recognizes one-half month accrual.)
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, 2009

Debit

Credit
  Cash
28,064


  Accounts receivable
0


  Teaching supplies
11,000


  Prepaid insurance
16,000


  Prepaid rent
2,178


  Professional library
33,000


  Accumulated depreciation-Professional library


10,000  
  Equipment
75,800


  Accumulated depreciation-Equipment


15,000  
  Accounts payable


39,500  
  Salaries payable


0  
  Unearned training fees


12,500  
  T. Wells, Capital


71,000  
  T. Wells, Withdrawals
44,000


  Tuition fees earned


111,000  
  Training fees earned


41,000  
  Depreciation expense-Professional library
0


  Depreciation expense-Equipment
0


  Salaries expense
52,000


  Insurance expense
0


  Rent expense
23,958


  Teaching supplies expense
0


  Advertising expense
8,000


  Utilities expense
6,000


  Totals
$300,000

$300,000  

Accounting: Problem 3-3A


 Requirement 1:
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. Assume that adjusting entries are made only at year-end. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Adjustment (a):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (b):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (c):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (d):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (e):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (f):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (g):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  


Adjustment (h):
  Date
General Journal
Debit
Credit
  Dec. 31
  


      

  

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 owner’s equity for the year 2009 and prepare its balance sheet as of December 31, 2009. 


5.  After completing problem 3-3A complete the following:
1. The Net Income from the Income Statement of the Wells Teaching Institute for 2009.
2. Total Assets on the Balance Sheet of the Wells Teaching Institute as of December 31, 2009.
3. The Profit Margin for the Wells Teaching Institute for 2009.
4. Back up your answers with appropriate statements or worksheets so that I can detect where you went wrong if your answers are incorrect.

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