Reference no: EM132558588

Question - Preparing adjusting entries, adjusted trial balance, and financial statements

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, 2017, 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, 2017, follow.

Additional Information Items

1. An analysis of WTI's insurance policies shows that $2,807 of coverage has expired.

2. An inventory count shows that teaching supplies costing $2,433 are available at year-end 2017.

3. Annual depreciation on the equipment is $11,227.

4. Annual depreciation on the professional library is $5,614.

5. 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 $2,300, 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 2018.

6. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an individual for $3,219 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.)

7. 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.

8. The balance in the Prepaid Rent account represents rent for December.

WELLS TECHNICAL INSTITUTE

Unadjusted Trial Balance

December 31, 2017 Debit CreditCash$27,245 Accounts receivable 0 Teaching supplies 10,478 Prepaid insurance 15,719 Prepaid rent 2,097 Professional library 31,436 Accumulated depreciation-Professional library $9,432Equipment 73,338 Accumulated depreciation-Equipment 16,768Accounts payable 37,749Salaries payable 0Unearned training fees 11,500Common stock 12,000Retained earnings 54,646Dividends 41,916 Tuition fees earned 106,885Training fees earned 39,820Depreciation expense-Professional library 0 Depreciation expense-Equipment 0 Salaries expense 50,300 Insurance expense 0 Rent expense 23,067 Teaching supplies expense 0 Advertising expense 7,336 Utilities expense 5,868 Totals$288,800 $288,800

Required -

a. Prepare Wells Technical Institute's income statement for the year 2017.

b. Prepare Wells Technical Institute's statement of owner's equity for the year 2017.

c. Prepare Wells Technical Institute's balance sheet as of December 31, 2017.