Acc225 Fundamentals of Accounting Principles: P3-3A Watson Technical Institute (WTI)

Acc225 Fundamentals of Accounting Principles: P3-3A Watson Technical Institute (WTI)

Acc225 Fundamental Accounting Principles

P3-3A
Watson Technical Institute(WTI) , a school owned by Tom Watson, 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, 2011, follows. WTI initially records repaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31,2011, follows:
Additional Information Items
a. An analysis of WTI's insurance policies shows that $3,000 of coverage has expired.
b. An inventory count shows that teching supplies costing $2,600 are available at year-end 2011
c. Annual depreciation on the equipment is $12,000
d. Annual depreciation on the professional library is 6,000.
e. 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 $2,200, and the client paid the first five month's 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 2012.
f. On October 15, WTI agreed to teach a four-month class (beginning immediately ) for an individual for $3,000 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.)
g. WTI's two employees are paid weekly, As of the end of the year, two day's salaries have accrued at the rate of $100 per day for each employee.
h.The balance in the Prepaid Rent account represents rent for December.
WATSON TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31, 2011
Debt Credit
Cash 26,000
Account Receivable 0
Teaching supplies 10,000
Prepaid Insurance 15,000
Prepaid rent 2,000
Professional library 30,000
Accumulated depreciation-Professional library 9,000
Equipment 70,000
Accumulated depreciation-Equipment 16,000
Account Payable 36,000
Salaries payable 0
Unearned training fees 11,000
T.Watson, Capital 63,600
T. Watson, Withdrawals 40,000
Tuition fees earned 102,000
Training fees earned 38,000
Depreciation expense-Professional library 0
Depreciation expense-Equipment 0
Salaries expense 48,000
Insurance expense 0
Rent expense 22,000
Teaching supplies expense 0
Advertising expense 7,000
Utilities expense 5,600
Total 275,600 275,600

Required:
1. Prepare T-accounts ( represents the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through h and post them to the T-accounts. Assume that adjusting entries are made only at year-end.
3. Update balances in the T-accounts for the adjusting entries and prepare an adjusted trail balance.
4. Prepare Watson Technical Institute's income statement and statement of owner's equity for the year 2011 and prepare its balance sheet as of December 31,2011.
Acc225 Fundamentals of Accounting Principles: P3-3A Watson Technical Institute (WTI)
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