
Concept explainers
1.
To prepare: T-account with balances of unadjusted
1.

Explanation of Solution
Cash Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 60,000 | Balance c/f | 60,000 | |
60,000 | 60,000 |
The ending balance is $60,000.
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 0 | |
0 | 0 |
The ending balance is $0.
Teaching Supplies Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 70,000 | Balance c/f | 70,000 | |
70,000 | 70,000 |
The ending balance is $70,000.
Prepaid Insurance Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 19,000 | Balance c/f | 19,000 | |
19,000 | 19,000 |
The ending balance is $19,000.
Prepaid Rent Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 3,800 | Balance c/f | 3,800 | |
3,800 | 3,800 |
The ending balance is $3,800.
Professional Library Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 12,000 | Balance c/f | 12,000 | |
12,000 | 12,000 |
The ending balance is $12,000.
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 2,500 | Balance b/f | 2,500 | |
2,500 | 2,500 |
The ending balance is $2,500.
Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 40,000 | Balance c/f | 40,000 | |
40,000 | 40,000 |
The ending balance is $40,000.
Accumulated Depreciation-Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 20,000 | Balance b/f | 20,000 | |
20,000 | 20,000 |
The ending balance is $20,000.
Accounts Payable Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 11,200 | Balance b/f | 11,200 | |
11,200 | 11,200 |
The ending balance is $11,200.
Salaries Payable Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 0 | Balance b/f | 0 | |
0 | 0 |
The ending balance is $0.
Unearned Training Fees Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 28,600 | Balance b/f | 28,600 | |
28,600 | 28,600 |
The ending balance is $28,600.
Common Stock Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 11,000 | Balance b/f | 11,000 | |
11,000 | 11,000 |
The ending balance is $11,000.
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 60,500 | Balance b/f | 60,500 | |
60,500 | 60,500 |
The ending balance is $60,500.
Dividends Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 20,000 | Balance c/f | 20,000 | |
20,000 | 20,000 |
The ending balance is $20,000.
Tuition Fees Earned Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 129,200 | Balance b/f | 129,200 | |
129,200 | 129,200 |
The ending balance is $129,200.
Training Fees Earned Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 68,000 | Balance b/f | 68,000 | |
68,000 | 68,000 |
The ending balance is $68,000.
Depreciation expense-Professional Library Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 0 | |
0 | 0 |
The ending balance is $0.
Depreciation expense-Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 0 | |
0 | 0 |
The ending balance is $0.
Salaries Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 44,200 | Balance c/f | 44,200 | |
44,200 | 44,200 |
The ending balance is $44,200.
Insurance Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 0 | |
0 | 0 |
Rent Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 29,600 | Balance c/f | 29,600 | |
29,600 | 29,600 |
The ending balance is $33,000.
Teaching Supplies Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 0 | |
0 | 0 |
The ending balance is $0.
Advertising Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 19,000 | Balance c/f | 19,000 | |
19,000 | 19,000 |
The ending balance is $19,000.
Utilities Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 13,400 | Balance c/f | 13,400 | |
13,400 | 13,400 |
The ending balance is $13,400.
2.
To prepare:
2.

Explanation of Solution
a.
Date | Particulars | Post ref | Debit ($) | Credit ($) |
Dec 31 | Insurance Expenses | 9,500 | ||
Prepaid Insurance | 9,500 | |||
(Being insurance coverage worth $9,500 has expired.) |
3.
To prepare: Ledger account and trial balance.
3.

Explanation of Solution
To update T-accounts for the adjusting entries.
Cash Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 60,000 | Balance c/f | 60,000 | |
60,000 | 60,000 |
The ending balance is $60,000.
Accounts Receivable Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 5,750 | |
Tuition fees earned | 5,750 | |||
5,750 | 5,750 |
The ending balance is $5,750.
Teaching Supplies Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 70,000 | Teaching supplies expense | 50,000 | |
Balance c/f | 20,000 | |||
70,000 | 70,000 |
The ending balance is $70,000.
Prepaid Insurance Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 9,500 | Insurance expense | 9,500 | |
Balance c/f | 9,500 | |||
19,000 | 19,000 |
The ending balance is $9,500.
Prepaid Rent Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 3,800 | Rent expense | 3,800 | |
Balance c/f | 0 | |||
3,800 | 3,800 |
The ending balance is $0.
Professional Library Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 12,000 | Balance c/f | 12,000 | |
12,000 | 12,000 |
The ending balance is $12,000.
Accumulated | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 4,900 | Balance b/f | 2,500 | |
Depreciation | 2,400 | |||
4,900 | 4,900 |
The ending balance is $4,900.
Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 40,000 | Balance c/f | 40,000 | |
40,000 | 40,000 |
The ending balance is $40,000.
Accumulated Depreciation-Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 25,000 | Balance b/f | 20,000 | |
Depreciation | 5,000 | |||
25,000 | 25,000 |
The ending balance is $25,000.
Accounts Payable Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 11,200 | Balance b/f | 11,200 | |
11,200 | 11,200 |
The ending balance is $11,200.
Salaries Payable Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 450 | Balance b/f | 0 | |
Salaries expense | 450 | |||
450 | 450 |
The ending balance is $450.
Unearned Training Fees Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Training fees earned | 28,600 | Balance b/f | 28,600 | |
Balance c/f | 0 | |||
28,600 | 28,600 |
The ending balance is $0.
Common Stock Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 11,000 | Balance b/f | 11,000 | |
11,000 | 11,000 |
The ending balance is $11,000.
Retained Earnings Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 60,500 | Balance b/f | 60,500 | |
60,500 | 60,500 |
The ending balance is $60,500.
Dividends Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 20,000 | Balance c/f | 20,000 | |
20,000 | 20,000 |
The ending balance is $20,000.
Tuition Fees Earned Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 134,950 | Balance b/f | 129,200 | |
Accounts receivable | 5,750 | |||
134,950 | 134,950 |
The ending balance is $134,950.
Training Fees Earned Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance c/f | 96,600 | Balance b/f | 68,000 | |
Unearned training fees | 28,600 | |||
96,600 | 96,600 |
The ending balance is $96,600.
Depreciation Expense-Professional Library Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 2,400 | |
Accumulated Depreciation-Professional Library Account | 2,400 | |||
2,400 | 2,400 |
The ending balance is $2,400.
Depreciation expense-Equipment Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 5,000 | |
Accumulated Depreciation | 5,000 | 0 | ||
5,000 | 5,000 |
The ending balance is $5,000.
Salaries Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 44,200 | Balance c/f | 44,650 | |
Salaries payable | 450 | |||
44,650 | 44,650 |
The ending balance is $44,650.
Insurance Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 9,500 | |
Prepaid insurance | 9,500 | |||
9,500 | 9,500 |
The ending balance is $9,500.
Rent Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 29,600 | Balance c/f | 33,400 | |
Prepaid rent | 3,800 | |||
33,400 | 33,400 |
The ending balance is $33,400.
Teaching Supplies Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 0 | Balance c/f | 50,000 | |
Teaching supplies | 50,000 | |||
50,000 | 50,000 |
The ending balance is $50,000.
Advertising Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 19,000 | Balance c/f | 19,000 | |
19,000 | 19,000 |
The ending balance is $19,000.
Utilities Expense Account | ||||
Particulars | Debit ($) | Particulars | Credit ($) | |
Balance b/f | 13,400 | Balance c/f | 13,400 | |
13,400 | 13,400 |
The ending balance is $13,400.
Prepare adjusted trial balance.
A Institute | ||
Adjusted Trial Balance | ||
For the year ended on December 31, 2017 | ||
Particulars | Debit ($) | Credit ($) |
Cash | 60,000 | |
Account Receivable | 5,750 | |
Teaching Supplies | 20,000 | |
Prepaid Insurance | 9,500 | |
Prepaid rent | 0 | |
Professional Library | 12,000 | |
Accumulated Depreciation-Professional Library | 4,900 | |
Equipment | 40,000 | |
Accumulated Depreciation-Equipment | 25,000 | |
Accounts payable | 11,200 | |
Salaries payable | 450 | |
Unearned training fees | 0 | |
Common stock | 11,000 | |
Retained earning | 60,500 | |
Dividends | 20,000 | |
Tuition Fees Earned | 134,950 | |
Training fees earned | 96,600 | |
Depreciation expense-Professional Library | 2,400 | |
Depreciation expense-Equipment | 5,000 | |
Salaries Expense | 44,650 | |
Insurance Expense | 9,500 | |
Rent expense | 33,400 | |
Teaching supplies expense | 50,000 | |
Advertising expense | 19,000 | |
Utilities expense | 13,400 | |
Totals | 344,600 | 344,600 |
4.
To prepare: Income statement and statement of retained earnings and
4.

Explanation of Solution
A Institute | ||
Income Statement | ||
For year ended December 31, 2017 | ||
Particulars | Amount ($) | Amount ($) |
Revenue: | ||
Service Revenue | 231,550 | |
Total Revenue | 231,550 | |
Expenses: | ||
Insurance Expense | 9,500 | |
Salaries Expense | 44,650 | |
Teaching Supplies Expense | 50,000 | |
Rent expenses | 33,400 | |
Advertising Expense | 19,000 | |
Utility Expense | 13,400 | |
Depreciation Expense-Professional Library | 2,400 | |
Depreciation Expense-Equipment | 5,000 | |
Total Expense | 177,350 | |
Net income | 54,200 |
Net income of A Institute is $54,200.
Working note:
Prepare Retained Earnings Statement:
A Institute | ||
Retained Earnings Statement | ||
As on December 31, 2017 | ||
Particulars | Amount ($) | |
Opening balance | 60,500 | |
Net income | 54,200 | |
Dividends | (20,000) | |
Retained earnings | 94,700 |
Therefore, Retained earnings of A.I are $94,700.
Prepare balance sheet:
A Institute | ||
Balance Sheet | ||
As on December 31, 2017 | ||
Particulars | Amount ($) | |
Assets | ||
Cash | 60,000 | |
Account Receivable | 5,750 | |
Teaching Supplies | 20,000 | |
Prepaid Insurance | 9,500 | |
Prepaid rent | 0 | |
Professional Library | 12,000 | |
Less: Accumulated Depreciation | (4,900) | 7,100 |
Equipment | 40,000 | |
Less: Accumulated depreciation | (25,000) | 15,000 |
Total Assets | 117,350 | |
Liabilities and | ||
Liabilities | ||
Accounts Payable | 11,200 | |
Salaries Payable | 450 | |
Unearned training Fees | 0 | |
Stockholder’s Equity | ||
Common Stock | 11,000 | |
Retained earnings | 94,700 | |
Total stockholders’ equity | 105,700 | |
Total Liabilities and Stockholder’s equity | 117,350 |
Balance sheet total is $117,350.
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