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.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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

  1. An analysis of WTI's insurance policies shows that $3,732 of coverage has expired.
  2. An inventory count shows that teaching supplies costing $3,235 are available at year-end.
  3. Annual depreciation on the equipment is $14,929.
  4. Annual depreciation on the professional library is $7,464.
  5. 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.
  6. 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.
  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
  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.

Expert Solution
Step 1 Introduction

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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