Wells Technical Institute (WTI) provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Its unadjusted trial balance as of December 31 follows, along with descriptions of items a through h that require adjusting entries on December 31. Additional Information Items An analysis of WTI's insurance policies shows that $3,732 of coverage has expired. An inventory count shows that teaching supplies costing $3,235 are available at year-end. Annual depreciation on the equipment is $14,929. Annual depreciation on the professional library is $7,464. On September 1, WTI agreed to do five training courses for a client for $2,300 each. Two courses will start immediately and finish before the end of the year. Three courses will not begin until next year. The client paid $11,500 cash in advance for all five training courses on September 1, and WTI credited Unearned Revenue. On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $12,600 of the tuition revenue has been earned by WTI. 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. The balance in the Prepaid Rent account represents rent for December. WELLS TECHNICAL INSTITUTE Unadjusted Trial Balance December 31 Debit Credit Cash $ 26,793 Accounts receivable 0 Teaching supplies 10,304 Prepaid insurance 15,458 Prepaid rent 2,062 Professional library 30,913 Accumulated depreciation—Professional library $ 9,275 Equipment 100,000 Accumulated depreciation—Equipment 16,489 Accounts payable 24,000 Salaries payable 0 Unearned revenue 11,500 Common stock 21,351 Retained earnings 85,000 Dividends 41,220 Tuition revenue 105,108 Training revenue 39,158 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 49,464 Insurance expense 0 Rent expense 22,682 Teaching supplies expense 0 Advertising expense 7,214 Utilities expense 5,771 Totals $ 311,881 $ 311,881 3-a. Prepare Wells Technical Institute's income statement for the year. 3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $85,000 on December 31 of the prior year. 3-c. Prepare Wells Technical Institute's balance sheet as of December 31.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
[The following information applies to the questions displayed below.]
Wells Technical Institute (WTI) provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations. WTI initially records prepaid expenses and unearned revenues in balance sheet accounts. Its unadjusted
Additional Information Items
- An analysis of WTI's insurance policies shows that $3,732 of coverage has expired.
- An inventory count shows that teaching supplies costing $3,235 are available at year-end.
- Annual depreciation on the equipment is $14,929.
- Annual depreciation on the professional library is $7,464.
- On September 1, WTI agreed to do five training courses for a client for $2,300 each. Two courses will start immediately and finish before the end of the year. Three courses will not begin until next year. The client paid $11,500 cash in advance for all five training courses on September 1, and WTI credited Unearned Revenue.
- On October 15, WTI agreed to teach a four-month class (beginning immediately) for an executive with payment due at the end of the class. At December 31, $12,600 of the tuition revenue has been earned by WTI.
- 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.
- The balance in the Prepaid Rent account represents rent for December.
| WELLS TECHNICAL INSTITUTE | ||
| Unadjusted Trial Balance | ||
| December 31 | ||
| Debit | Credit | |
|---|---|---|
| Cash | $ 26,793 | |
| 0 | ||
| Teaching supplies | 10,304 | |
| Prepaid insurance | 15,458 | |
| Prepaid rent | 2,062 | |
| Professional library | 30,913 | |
| $ 9,275 | ||
| Equipment | 100,000 | |
| Accumulated depreciation—Equipment | 16,489 | |
| Accounts payable | 24,000 | |
| Salaries payable | 0 | |
| Unearned revenue | 11,500 | |
| Common stock | 21,351 | |
| 85,000 | ||
| Dividends | 41,220 | |
| Tuition revenue | 105,108 | |
| Training revenue | 39,158 | |
| Depreciation expense—Professional library | 0 | |
| Depreciation expense—Equipment | 0 | |
| Salaries expense | 49,464 | |
| Insurance expense | 0 | |
| Rent expense | 22,682 | |
| Teaching supplies expense | 0 | |
| Advertising expense | 7,214 | |
| Utilities expense | 5,771 | |
| Totals | $ 311,881 | $ 311,881 |
3-a. Prepare Wells Technical Institute's income statement for the year.
3-b. Prepare Wells Technical Institute's statement of retained earnings for the year. The Retained Earnings account balance was $85,000 on December 31 of the prior year.
3-c. Prepare Wells Technical Institute's balance sheet as of December 31.
Statement of retained earnings is the statement that describes an entity's earnings or profits accumulated over a period of time from the beginning of the company. This statement reports the changes in earnings over a period. Retained earnings at the close of the year are computed by adjusting profits and any dividends from the opening balance of retained earnings.
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