Wells Teaching Institute

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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	(Click to select) Rent Expense Unearned Training Fees Teaching Supplies Expense Accounts Receivable Unexpired Insurance Depreciation Expense-Professional Library Salaries Expense Insurance Expense Depreciation Expense-Equipment Prepaid Insurance
	(Click to select) Accumulated Depreciation-Professional Library Cash Tuition Fees Earned Accumulated Depreciation-Equipment Salaries Payable Prepaid Insurance Insurance Expense Prepaid Rent Training Fees Earned Teaching Supplies

Adjustment (b):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Depreciation Expense-Professional Library Salaries Expense Accounts Receivable Unearned Training Fees Stock Insurance Expense Depreciation Expense-Equipment Rent Expense Teaching Supplies Teaching Supplies Expense
	(Click to select) Prepaid Rent Teaching Supplies Expense Teaching Supplies Tuition Fees Earned Accumulated Depreciation-Equipment Training Fees Earned Salaries Payable Accumulated Depreciation-Professional Library Supplies Payable Prepaid Insurance

Adjustment (c):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Accumulated Depreciation-Equipment Accounts Receivable Unearned Training Fees Depreciation Expense-Professional Library Equipment Depreciation Expense-Equipment Rent Expense Teaching Supplies Expense Salaries Expense Insurance Expense
	(Click to select) Teaching Supplies Salaries Payable Accumulated Depreciation-Professional Library Accumulated Depreciation-Equipment Equipment Prepaid Insurance Tuition Fees Earned Depreciation Expense-Equipment Prepaid Rent Training Fees Earned

Adjustment (d):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Teaching Supplies Expense Accumulated Depreciation-Professional Library Depreciation Expense-Professional Library Depreciation Expense-Equipment Rent Expense Insurance Expense Accounts Receivable Salaries Expense Unearned Training Fees Professional Library
	(Click to select) Prepaid Rent Tuition Fees Earned Accumulated Depreciation-Professional Library Prepaid Insurance Professional Library Depreciation Expense-Professional Library Accumulated Depreciation-Equipment Training Fees Earned Salaries Payable Teaching Supplies

Adjustment (e):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Unearned Training Fees Teaching Supplies Expense Depreciation Expense-Equipment Prepaid Income Insurance Expense Salaries Expense Rent Expense Training Fees Earned Accounts Receivable Depreciation Expense-Professional Library
	(Click to select) Salaries Payable Accumulated Depreciation-Professional Library Accumulated Depreciation-Equipment Teaching Supplies Tuition Fees Earned Prepaid Insurance Unearned Training Fees Training Fees Earned Prepaid Rent Income Received in Advance

Adjustment (f):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Cash Tuition Fees Earned Depreciation Expense-Professional Library Rent Expense Depreciation Expense-Equipment Unearned Training Fees Teaching Supplies Expense Salaries Expense Accounts Receivable Insurance Expense
	(Click to select) Training Fees Earned Accounts Receivable Tuition Fees Earned Salaries Payable Accumulated Depreciation-Professional Library Unearned Fees Prepaid Rent Teaching Supplies Accumulated Depreciation-Equipment Prepaid Insurance

Adjustment (g):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Teaching Supplies Expense Depreciation Expense-Equipment Salaries Expense Salaries Payable Depreciation Expense-Professional Library Rent Expense Unearned Training Fees Accounts Receivable Insurance Expense Accrued Expense
	(Click to select) Cash Prepaid Insurance Training Fees Earned Salaries Payable Tuition Fees Earned Prepaid Rent Accumulated Depreciation-Equipment Salaries Expense Teaching Supplies Accumulated Depreciation-Professional Library

Adjustment (h):

Date	General Journal	Debit	Credit
Dec. 31	(Click to select) Rent Receivable Unearned Training Fees Prepaid Rent Depreciation Expense-Equipment Accounts Receivable Salaries Expense Insurance Expense Depreciation Expense-Professional Library Rent Expense Teaching Supplies Expense
	(Click to select) Accumulated Depreciation-Professional Library Teaching Supplies Prepaid Rent Rent Expense Salaries Payable Rent Payable Training Fees Earned Tuition Fees Earned Accumulated Depreciation-Equipment Prepaid Insurance
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.