ACCT 101 Week 3 Problem 3-3B
ACCT 101 Week 3 Problem 3-3B
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Following is the unadjusted trial balance for Alonzo Institute as of December 31, 2017, which initially records prepaid expenses and unearned revenues in balance sheet accounts. The institute provides one-on-one training to individuals who pay tuition directly to the business and offers extension training to groups in off-site locations. Shown after the trial balance are items a through h that require adjusting entries as of December 31, 2017.
ALONZO INSTITUTE
Unadjusted Trial Balance
December 31, 2017
Debit Credit
Cash 60,000
Accounts Receivable 0
Teaching Supplies 70,000
Prepaid Insurance 19,000
Prepaid Rent 3,800
Professional Library 12,000
Accumulated Depreciation – Professional Library 2,500
Equipment 40,000
Accumulated Depreciation – Equipment 20,000
Accounts Payable 11,200
Salaries Payable 0
Unearned Training Fees 28,600
Common stock 11,000
Retained earnings 60,500
Dividends 20,000
Tuition Fees Earned 129,200
Training Fees Earned 68,000
Depreciation Expense – Professional Library 0
Depreciation Expense – Equipment 0
Salaries Expense 44,200
Insurance Expense 0
Rent Expense 29,600
Teaching Supplies Expense 0
Advertising Expense 19,000
Utilities Expense 13,400
Totals $331,000 $331,000
Additional Information Items
1. An analysis of the institute’s insurance policies shows that $9,500 of coverage has expired.
2. An inventory count shows that teaching supplies costing $20,000 are available at year-end 2015.
3. Annual depreciation on the equipment is $5,000.
4. Annual depreciation on the professional library is $2,400.
5. On November 1, the institute agreed to do a special five month course (starting immediately) for a client. The contract calls for a $14,300 monthly fee, and the client paid the first two month’s fees in advance. When the cash was received, the unearned Training Fees account was credited. The last two month’s fees will be recorded when collected in 2017.
6. On October 15, the institute agreed to teach a four month class (beginning immediately) to an individual for $2,300 tuition per month payable at the end of the class. The class started on October 15, but no payment has yet been received. (The institute’s accruals are applied to the nearest half-month; for example, October recognizes one half month accrual.
7. The institute’s only employee is paid weekly. As of the end of the year, three day’s salaries have accrued at a rate of $150 per day.
8. The balance in the Prepaid Rent account represents rent for December.
Required
1. Prepare T-accounts (representing the ledger) with balances from the unadjusted trial balance.
2. Prepare the necessary adjusting journal entries for items a through h. 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 trial balance.
4 Prepare the company’s income statement and the statement of retained earnings for the year 2017, and prepare its balance sheet as of December 31, 2017.
