1.Following is the unadjusted trial balance for Augustus Institute as of December 31, 2013, which initially records prepaid expenses and unearned revenues in balance sheet accounts. The Institute provides one on one training to individuals who pay tuition directly to the business and offers extension training to groups in off site locations. Shown after the trial balance are items a through h that require adjusting entries as of December 31, 2013.
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Additional Information Items
a. An analysis of the Institute's insurance policies shows that $9,500 of coverage has expired.
b. An inventory count shows that teaching supplies costing $20,000 are available at year end 2013.
c. Annual depreciation on the equipment is $5,000.
d. Annual depreciation on the professional library is $2,400.
e. On November 1, the Institute agreed to do a special five month course (starting immediately) for a client. The contract calls for a $14,300 monthly fee, and the client paid the first two months' fees in advance. When the cash was received, the Unearned Training Fees account was credited. The last two month's fees will be recorded when collected in 2014.
f. On October 15, the Institute agreed to teach a four month class (beginning immediately) to an individual for $2,300 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (The Institute's accruals are applied to the nearest half month; for example, October recognizes one half month accrual.)
g. The Institute's only employee is paid weekly. As of the end of the year, three days' salaries have accrued at the rate of $150 per day.
h. The balance in the Prepaid Rent account represents rent for December.
Required:
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, and post them to the T accounts. Assume that adjusting entries are made only at year end.
3. Update balances in the T accounts for the adjusting entries and prepare an adjusted trial balance.
4. Prepare the company's income statement and statement of owner's equity for the year 2013, and prepare its balance sheet as of December 31,2013.