Wells Technical Institute (WTI), a school owned by Tristana Wells

Wells Technical Institute (WTI), a school owned by Tristana Wells, 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
a. An analysis of WTI’s insurance policies shows that $2,939 of coverage has expired.

Account	Debit	Credit
Insurance Expense	$2,939
Prepaid Insurance		$2,939

b. An inventory count shows that teaching supplies costing $2,547 are available at year-end.

Account	Debit	Credit
Teaching Supplies Expense	$7,582
Teaching Supplies		$7,582

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c. Annual depreciation on the equipment is $11.756.
d. Annual depreciation on the professional library is $5,878.
e. On September 1, WTI agreed to do five training courses for a client for $2,600 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 $13,000 cash in advance for all five training courses on September 1, and WTI credited Unearned Revenue.
f. 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, $7,950 of the tuition revenue has been earned by WTI.
g. 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.
h. The balance in the Prepaid Rent account represents rent for December.

Solution – Wells Technical Institute

a. Insurance Expired

The insurance policy coverage of $2,939 has expired and needs to be recognized as an expense.

Account	Debit	Credit
Insurance Expense	$2,939
Prepaid Insurance		$2,939

b. Teaching Supplies Used

The inventory count shows $2,547 of teaching supplies remaining, which means the rest have been used. The unadjusted balance for teaching supplies is $10,129, so the supplies used is $10,129 – $2,547 = $7,582.

Account	Debit	Credit
Teaching Supplies Expense	$7,582
Teaching Supplies		$7,582

c. Depreciation on Equipment

The annual depreciation for the equipment is $11,756.

Account	Debit	Credit
Depreciation Expense – Equipment	$11,756
Accumulated Depreciation – Equipment		$11,756

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