Question: 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, 2015, 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, 2015, follow.
Additional Information Items
a. An analysis of WTI's insurance policies shows that $3,864 of coverage has expired.
b. An inventory count shows that teaching supplies costing $3,349 are available at year-end 2015.
c. Annual depreciation on the equipment is $15,458.
d. Annual depreciation on the professional library is $7,729.
e. On November 1, WTI agreed to do a special six-month course (starting immediately) for a client. The contract calls for a monthly fee of $2,900, 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 2016.
f. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $4,700 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (WTI's accruals are applied to the nearest half-month; for example, October recognizes one-half month accrual.)
g. WTI's two employees are paid weekly. As of the end of the year, two days' salaries 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, 2015
Debit Credit
Cash $26,189
Accounts receivable 0
Teaching supplies 10,071
Prepaid insurance 15,110
Prepaid rent 2,015
Professional library 30,217
Accumulated depreciation-Professional library $9,066
Equipment 70,500
Accumulated depreciation-Equipment 16,117
Accounts payable 32,840
Salaries payable 0
Unearned training fees 14,500
Common stock 12,812
Retained earnings 51,250
Dividends 40,291
Tuition fees earned 102,740
Training fees earned 38,275
Depreciation expense-Professional library 0
Depreciation expense-Equipment 0
Salaries expense 48,350
Insurance expense 0
Rent expense 22,165
Teaching supplies expense 0
Advertising expense 7,051
Utilities expense 5,641
Totals $277,600 $277,600
1. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end.
2. Prepare an adjusted trial balance.