Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements L.O. A1, P1, P2, P3 [The following information applies to the questions displayed below.] 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 prepaid expenses and unearned revenues in balance sheet accounts. Descriptions of items a through h that require adjusting entries on December 31, 2011, follow. Additional Information Items a. An analysis of WTI's insurance policies shows that $3,335 of coverage has expired. b. An inventory count shows that teaching supplies costing $2,891 are available at year-end 2011. c. Annual depreciation on the equipment is $13,342. d. Annual depreciation on the professional library is $6,671. 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 $2,300, and the client paid the first five months' 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 $4,261 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 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. WATSON TECHNICAL INSTITUTE Unadjusted Trial Balance December 31, 2011 Debit Credit Cash $ 26,340 Accounts receivable 0 Teaching supplies 10,129 Prepaid insurance 15,197 Prepaid rent 2,027 Professional library 30,391 Accumulated depreciation—Professional library $ 9,119 Equipment 70,903 Accumulated depreciation—Equipment 16,210 Accounts payable 36,112 Salaries payable 0 Unearned training fees 11,500 T. Watson, Capital 64,431 T. Watson, Withdrawals 40,523 Tuition fees earned 103,332 Training fees earned 38,496 Depreciation expense—Professional library 0 Depreciation expense—Equipment 0 Salaries expense 48,628 Insurance expense 0 Rent expense 22,297 Teaching supplies expense 0 Advertising expense 7,092 Utilities expense 5,673 ________________________________________ ________________________________________ ________________________________________ ________________________________________ Totals $ 279,200 $ 279,200 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ references Section Break Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements L.O. A1, P1, P2, P3 2. value: 15.00 points Problem 3-3A Part 2 Required: 2. Prepare the necessary adjusting journal entries for items a through h. Assume that adjusting entries are made only at year-end. (Round your answer to nearest dollar amount. Omit the "$" sign in your response.) Adjusting entries (all dated Dec. 31, 2011). General Journal Debit Credit a. b. c. d. e. f. g. h. ________________________________________ check my workeBook Links (4) references Worksheet Learning Objective: 03-A1 Explain how accounting adjustments link to financial statements. Learning Objective: 03-P3 Prepare financial statements from an adjusted trial balance. Problem 3-3A Part 2 Learning Objective: 03-P1 Prepare and explain adjusting entries. Difficulty: Hard Learning Objective: 03-P2 Explain and prepare an adjusted trial balance. 3. value: 10.00 points Problem 3-3A Part 3 3.1 Post the balance from the unadjusted trial balance and the adjusting entries in to the T-accounts. (Record the transactions in the given order. Round your answers to the nearest dollar amount. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) Cash ________________________________________ ________________________________________ Unadj. bal. Accounts Receivable ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Teaching Supplies ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Prepaid Insurance ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Prepaid Rent ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Professional Library ________________________________________ ________________________________________ Unadj. bal. Accumulated Depreciation—Professional library ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Equipment ________________________________________ ________________________________________ Unadj. Bal. Accumulated Depreciation—Equipment ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Accounts Payable ________________________________________ ________________________________________ Unadj. bal. Salaries Payable ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Unearned Training Fees ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ T. Watson, Capital ________________________________________ ________________________________________ Unadj. bal. T. Watson, Withdrawals ________________________________________ ________________________________________ Unadj. bal. Tuition Fees Earned ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Training Fees Earned ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Depreciation Expense—Professional Library ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Depreciation Expense—Equipment ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Salaries Expense ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Insurance Expense ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Rent Expense ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Teaching Supplies Expense ________________________________________ ________________________________________ Unadj. bal. ________________________________________ ________________________________________ Adj. bal. ________________________________________________________________________________ Advertising Expense ________________________________________ ________________________________________ Unadj. bal. Utilities Expense ________________________________________ ________________________________________ Unadj. bal. ________________________________________ 3.2 Prepare an adjusted trial balance. (The items in the Trial Balance should be grouped as follows: Assets and Liabilities (in order of their liquidity) then Equity, Revenues, and Expenses. Leave no cells blank - be certain to enter "0" wherever required. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.) Watson Technical Institute Adjusted Trial Balance December 31, 2011 Debit Credit $ $ ________________________________________ ________________________________________ Totals $ $ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ check my workeBook Links (4) references Worksheet Learning Objective: 03-A1 Explain how accounting adjustments link to financial statements. Learning Objective: 03-P3 Prepare financial statements from an adjusted trial balance. Problem 3-3A Part 3 Learning Objective: 03-P1 Prepare and explain adjusting entries. Difficulty: Hard Learning Objective: 03-P2 Explain and prepare an adjusted trial balance. 4. value: 10.00 points Problem 3-3A Part 4 4.1 Prepare Watson technical institute's income statement for the year 2011. (Round your answer to nearest dollar amount. Input all amounts as positive values. Omit the "$" sign in your response.) WATSON TECHNICAL INSTITUTE Income Statement For Year Ended December 31, 2011 Revenues $ ________________________________________ Total revenues $ Expenses ________________________________________ Total expenses ________________________________________ $ ________________________________________________________________________________ ________________________________________ 4.2 Prepare Watson technical institute's statement of owner's equity for the year 2011. (Round your answer to nearest dollar amount. Input all amounts as positive values. Omit the "$" sign in your response.) WATSON TECHNICAL INSTITUTE Statement of Owner's Equity For Year Ended December 31, 2011 $ ________________________________________ ________________________________________ $ ________________________________________________________________________________ ________________________________________ 4.3 Prepare Watson technical institute's balance sheet as of December 31, 2011. (Round your answer to nearest dollar amount. Be sure to list the assets and liabilities in order of their liquidity. Amounts to be deducted should be indicated by a minus sign. Omit the "$" sign in your response.) WATSON TECHNICAL INSTITUTE Balance Sheet December 31, 2011 Assets $ $ ________________________________________ ________________________________________ ________________________________________ ________________________________________ Total Assets $ ________________________________________________________________________________ Liabilities $ ________________________________________ Total Liabilities Equity ________________________________________ Total Liabilities and Equity $ ________________________________________________________________________________