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Concept explainers
Ledger account A general ledger represent account for company's financial statement with debit and credit account records validated by
Computation of necessary T accounts (representing the ledger) with balances from the unadjusted trial balance of Wells Technical Institute.
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Explanation of Solution
Cash | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 34,000 | ||
Adjusted balance | 34,000 |
Equipment | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 80,000 | ||
Adjusted balance | 80,000 |
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 15,000 | ||
Adjusted balance | 15,000 |
Teaching Supplies | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 8,000 | ||
Adjusted balance | 8,000 |
Accounts Payable | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 26,000 | ||
Adjusted balance | 26,000 |
Prepaid Insurance | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 12,000 | ||
Adjusted balance | 12,000 |
Salaries Payable | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Prepaid Rent | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 3,000 | ||
Adjusted balance | 3,000 | 0 |
Unearned Training Fees | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 12,500 | ||
Adjusted balance | 12,500 |
Professional Library | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 35,000 | ||
Adjusted balance | 35,000 |
T Wells, Capital | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 90,000 | ||
Adjusted balance | 90,000 |
Accumulated Depreciation-Professional Library | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 10,000 | ||
Adjusted balance | 10,000 |
T Wells, Withdrawal | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 50,000 | ||
Adjusted balance | 50,000 |
Tuition Fees Earned | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 1,23,900 | ||
Adjusted balance | 1,23,900 |
Insurance Expenses | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Training Fees Earned | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 40,000 | ||
Adjusted balance | 40,000 |
Rent Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 33,000 | ||
Adjusted balance | 33,000 |
Depreciation Expense-Professional Library | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Teacing Supplies Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Depreciation Expense-Equipment | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Adjusted balance | 0 |
Advertising Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 6,000 | ||
Adjusted balance | 6,000 |
Salaries Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 50,000 | ||
Adjusted balance | 50,000 |
Utilities Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 6,400 | ||
Adjusted balance | 6,400 |
Journal Entries
A
Accounting rules for journal entries:
- To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
- To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.
The necessary adjusting journal entries assuming that
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Explanation of Solution
Recording of insurance expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Insurance expense | 2,400 | ||
Prepaid expense | 2,400 | |||
(recording of insurance expense) |
- Since, insurance is an expense and expense is increased. Hence, insurance expense account is debited.
- Since, prepaid expense is an asset and asset is decreased. Hence, prepaid expense account is credited.
- Since, teaching supplies is an expense and expense is increased. Hence, teaching supplies expense account is debited.
- Since, teaching supplies account is a liability and liability is increased. Hence, teaching supplies account is credited.
- Since, depreciation is an expense and expense is increased. Hence, depreciation expense account is debited.
- Since, accumulated depreciation is a liability and liability is increased. Hence, accumulated depreciation account is credited.
- Since, depreciation is an expense and expense is increased. Hence, depreciation expense account is debited.
- Since, accumulated depreciation is a liability and liability is increased. Hence, accumulated depreciation account is credited.
- Since, unearned training fees is a liability and liability is decreased. Hence, Unearned training fees account is debited.
- Since, training fees earned is an income and income is increased. Hence, training fees earned account is credited.
- Since, accounts receiveable is an asset and asset is increased. Hence, accounts receiveable account is debited.
- Since, tuition fees earned is an income and income is increased. Hence, tuition fees earned account is credited.
- Since, salary is an expense and expense is increased. Hence, salary expense account is debited.
- Since, salary payable is a liability and liability is increased. Hence, salary payable account is credited.
- Since, rent is an expense and expense is increased. Hence, rent expense account is debited.
- Since, prepaid rent is an asset and asset is decreased. Hence, prepaid rent account is credited.
Recording of supplies expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Teaching supplies expense | 5,200 | ||
Teaching supplies | 5,200 | |||
(to record the expense of teaching supplies) |
Recording of
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Depreciation expense - equipment | 13,200 | ||
Accumulated depreciation − equipment | 13,200 | |||
(to record depreciation expense) |
Recording of depreciation expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Depreciation expense−professional library | 7,200 | ||
Accumulated depreciation−professional library | 7,200 | |||
(to record depreciation expense) |
Recording of training fees earned:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Unearned training fees | 5,000 | ||
Training fees earned | 5,000 | |||
(to record the training fees earned) |
Recording of fees earned:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Accounts receiveable | 7,500 | ||
Tuition fees earned | 7,500 | |||
(to record the sale of service) |
Recording of salary expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Salary expense | 400 | ||
Salary payable | 400 | |||
(to record the expense of salary) |
Recording of rent expense:
Date | Account Title and Explanation | Post Ref. | Debit($) | Credit($) |
December-31 | Rent expense | 3,000 | ||
Prepaid rent | 3,000 | |||
(to record the expense of rent) |
Ledger account:
A ledger is used to
Trial balance:
A trial balance is a statement of all debits and credits maintained in a double entry accounting system where total of debits and credits are equal.
The necessary balance in the ledger account for the adjusting entries and an adjusted trial balance.
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Explanation of Solution
Salaries Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 50,000 | ||
Salaries payable | 400 | ||
Adjusted balance | 50,400 |
Depreciation Expense-Equipment | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Accumulated depreciation-Equipment | 13,200 | ||
Adjusted balance | 13,200 |
Teacing Supplies Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Teaching supplies | 5,200 | ||
Adjusted balance | 5,200 |
Depreciation Expense-Professional Library | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Accumulated depreciation-Professional library | 7,200 | ||
Adjusted balance | 7,200 |
Rent Expense | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 33,000 | ||
Prepaid rent | 3,000 | ||
Adjusted balance | 36,000 |
Training Fees Earned | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 40,000 | ||
Unearned training fees | 5,000 | ||
Adjusted balance | 45,000 |
Insurance Expenses | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Prepaid Insurance | 2,400 | ||
Adjusted balance | 2,400 |
Tuition Fees Earned | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 123,900 | ||
Accounts receiveable | 7,500 | ||
Adjusted balance | 131,400 |
Accumulated Depreciation-Professional Library | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 10,000 | ||
Depreciation expense-Professional library | 7,200 | ||
Adjusted balance | 17,200 |
Unearned Training Fees | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 12,500 | ||
Training fees earned | 5,000 | ||
Adjusted balance | 7,500 |
Prepaid Rent | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 3,000 | Rent expense | 3,000 |
Adjusted balance | 0 | 0 |
Salaries Payable | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Salaries expense | 400 | ||
Adjusted balance | 400 |
Prepaid Insurance | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 12,000 | Insurance expense | 2,400 |
Adjusted balance | 9,600 |
Teaching Supplies | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 8,000 | Teaching supplies expense | 5,200 |
Adjusted balance | 2,800 |
Accumulated Depreciation-Equipment | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 15,000 | ||
Depreciation expense-Equipment | 13,200 | ||
Adjusted balance | 28,200 |
Accounts Receiveable | |||
Particulars | Amount ($) | Particulars | Amount ($) |
Unadjusted balance | 0 | ||
Tuition fees earned | 7,500 | ||
Adjusted balance | 7,500 |
The adjusted trial balance total for Company WTI are $3,45,700.
Company WTI | |||
Adjusted Trial Balance,For the year ended December 31 | |||
Debit($) | Credit($) | ||
Cash | 34,000 | ||
Accounts receiveable | 7,500 | ||
Teaching supplies | 2,800 | ||
Prepaid insurance | 9,600 | ||
Professional library | 35,000 | ||
Accumulated depreciation- Professional library | 17,200 | ||
Equipment | 80,000 | ||
Accumulated depreciation- Equipment | 28,200 | ||
Accounts payable | 26,000 | ||
Salaries payable | 400 | ||
Unearned training fees | 7,500 | ||
T.Wells, capital | 90,000 | ||
T.Wells, withdrawal | 50,000 | ||
Tuition fees earned | 131,400 | ||
Training fees earned | 45,000 | ||
Depreciation expense-Professional library | 7,200 | ||
Depreciation expense-Equipment | 13,200 | ||
Salaries expense | 50,400 | ||
Insurance expense | 2,400 | ||
Rent expense | 36,000 | ||
Teaching supplies expense | 5,200 | ||
Advertising expense | 6,000 | ||
Utilities expense | 6,400 | ||
Total | 345,700 | 345,700 |
4.
Income Statement:
A income statement is one of the financial statement of the company and shows the company's profit and loss for a particular period of time.
Statement of Owner'sEquity:
A statement of owner's equity reflects changes in capital balance of a business over a reporting period.
Balance Sheet:
A balance sheet is a
WTI's income statement, statement of owner's equity and balance sheet as of December, 31.
4.
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Explanation of Solution
Company WTI | |||
Income Statement For the year ended December 31 | |||
Debit($) | Credit($) | ||
Revenues: | |||
Tuition fees earned | 131,400 | ||
Training fees earned | 45,000 | ||
Total Revenue | 176,400 | ||
Expenses: | |||
Depreciation expense-Professional library | 7,200 | ||
Depreciation expense-Equipment | 13,200 | ||
Salaries expense | 50,400 | ||
Insurance expense | 2,400 | ||
Rent expense | 36,000 | ||
Teaching supplies expense | 5,200 | ||
Advertising expense | 6,000 | ||
Utilities expense | 6,400 | ||
Total Expense: | 126,800 | ||
Net Income: | 49,600 |
The statement of owner's equity for Company WTI shows the closing balance of $89,600.
Company WTI | |||
Statement of Owner's Equity | |||
Amount ($) | Amount($) | ||
Owner's Equity opening balance | 90,000 | ||
Add: Net income | 49,600 | ||
Total | 139,600 | ||
Less: Withdrawals | (50,000) | ||
Closing Balance | 89,600 |
The balance sheet for Company WTI shows a total of $1,23,500.
Wells Technical Institute | |||
Balance Sheet as at December 31 | |||
Amount | Amount | ||
Liabilities and Owners Equity | |||
Accounts payable | $26,000 | ||
Salary payable | $400 | ||
Unearned training fees | $7,500 | ||
Total Liabilities | $33,900 | ||
Owners Equity | $89,600 | ||
Total Liabilities and Owners Equity | $123,500 | ||
Current Assets, Loans & Advances | |||
Cash | $34,000 | ||
Accounts receiveable | $7,500 | ||
Teaching supplies | $2,800 | ||
Prepaid insurance | $9,600 | ||
Total Current Assets, Loans & Advances | $53,900 | ||
Property, Plant and Equipment | |||
Professional library | $17,800 | ||
Equipment | $51,800 | ||
Total Property, Plant and Equipment | $69,600 | ||
Total Assets | $123,500 |
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Chapter 3 Solutions
Fundamental Accounting Principles
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