Wells Technical Institute (WTI), a school owned by Tristana 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, 2008, follows. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that requires adjusting entries on December 31, 2008, follows.
Additional Information Items
a. An analysis of the school\'s insurance policies shows that $2,400 of coverage has expired.
b. An inventory count shows that teaching supplies costing $2,800 are available at year-end 2008.
c. Annual depreciation on the equipment is $13,200.
d. Annual depreciation on the professional library is $7,200.
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 2009.
f. On October 15, the school agreed to teach a four-month class (beginning immediately) for an individual for $3,000 tuition per month payable at the end of the class. The services are being provided as agreed, and no payment has yet been received.
g. The school\'s two employees are paid weekly. As of the end of the year, two days\' wages have accrued at the rate of $100 per day for each employee.
h. The balance in the Prepaid Rent account represents rent for December.
WELLS TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31, 2008
Accounts receivable 0
Teaching supplies 8,000
Prepaid insurance 12,000
Prepaid rent 3,000
Professional library 35,000
Accumulated depreciation-Professional library $10,000
Accumulated depreciation-Equipment 15,000
Accounts payable 26,000
Salaries payable 0
Unearned training fees 12,500
T. Wells, Capital 90,000
T. Wells, Withdrawals 50,000
Tuition fees earned 123,900
Training fees earned 40,000
Depreciation expense-Professional 0
Depreciation expense-Equip 0
Salaries expense 50,000
Insurance expense 0
Rent expense 33,000
Teaching supplies expense 0
Advertising expense 6,000
Utilities expense 6,400
Totals $317,400 $317,400
1. Offline (not submitted or graded in this system): 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.
3. Offline (not submitted or graded in this system): Post the adjustment entries to the T-accounts.
4. Prepare an adjusted trial balance. (Use the updated balances from the T-accounts.
5. Prepare Wells Technical Institute\'s income statement as of December 31, 2008.
6. Prepare Wells Technical Institute\'s statement of owner\'s equity for the year 2008.
7. Prepare Wells Technical Institute\'s balance sheet as of December 31, 2008.