Prepare the income statement for the calendar year 2013
SOLUTION AT Australian Expert Writers
Problem 3-1A Identifying adjusting entries with explanations LO P1
For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.)
A.
To record receipt of unearned revenue.
B.
To record this period’s earning of prior unearned revenue.
C.
To record payment of an accrued expense.
D.
To record receipt of an accrued revenue.
E.
To record an accrued expense.
F.
To record an accrued revenue.
G.
To record this period’s use of a prepaid expense.
H.
To record payment of a prepaid expense.
I.
To record this period’s depreciation expense.
Problem 3-3A Preparing adjusting entries, adjusted trial balance, and financial statements LO A1, P1, P2, P3
[The following information applies to the questions displayed below.]
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. Its unadjusted trial balance as of December 31, 2013, 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, 2013, follow.
Additional Information Items
a.
An analysis of WTI’s insurance policies shows that $2,400 of coverage has expired.
b.
An inventory count shows that teaching supplies costing $2,800 are available at year-end 2013.
c.
Annual depreciation on the equipment is $13,200.
d.
Annual depreciation on the professional library is $7,200.
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 $2,500, 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 2014.
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 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.
WELLS TECHNICAL INSTITUTEUnadjusted Trial BalanceDecember 31, 2013
Debit
Credit
Cash
$
34,000
Accounts receivable
Teaching supplies
8,000
Prepaid insurance
12,000
Prepaid rent
3,000
Professional library
35,000
Accumulated depreciation—Professional library
$
10,000
Equipment
80,000
Accumulated depreciation—Equipment
15,000
Accounts payable
26,000
Salaries payable
Unearned training fees
12,500
Common stock
10,000
Retained earnings
80,000
Dividends
50,000
Tuition fees earned
123,900
Training fees earned
40,000
Depreciation expense—Professional library
Depreciation expense—Equipment
Salaries expense
50,000
Insurance expense
Rent expense
33,000
Teaching supplies expense
Advertising expense
6,000
Utilities expense
6,400
Totals
$
317,400
$
317,400
Problem 3-3A Part 1
1.
Prepare the necessary adjusting journal entries for items a through h.
Problem 3-3A Part 2
2.1
Post the balance from the unadjusted trial balance and the adjusting entries to the T-accounts
2.2
Prepare an adjusted trial balance.
Problem 3-3A Part 3
3.1
Prepare Wells Technical Institute’s income statement for the year 2013.
Problem 3-8A Preparing closing entries, financial statements, and ratios C4 A2 A3 P3 P4
The adjusted trial balance for Tybalt Construction as of December 31, 2013, follows.
TYBALT CONSTRUCTIONAdjusted Trial BalanceDecember 31, 2013
No.
Account Title
Debit
Credit
101
Cash
$
5,000
104
Short-term investments
23,000
126
Supplies
8,100
128
Prepaid insurance
7,000
167
Equipment
40,000
168
Accumulated depreciation—Equipment
$
20,000
173
Building
150,000
174
Accumulated depreciation—Building
50,000
183
Land
55,000
201
Accounts payable
16,500
203
Interest payable
2,500
208
Rent payable
3,500
210
Wages payable
2,500
213
Property taxes payable
900
233
Unearned professional fees
7,500
251
Long-term notes payable
67,000
307
Common stock
5,000
318
Retained earnings
121,400
319
Dividends
13,000
401
Professional fees earned
97,000
406
Rent earned
14,000
407
Dividends earned
2,000
409
Interest earned
2,100
606
Depreciation expense—Building
11,000
612
Depreciation expense—Equipment
6,000
623
Wages expense
32,000
633
Interest expense
5,100
637
Insurance expense
10,000
640
Rent expense
13,400
652
Supplies expense
7,400
682
Postage expense
4,200
683
Property taxes expense
5,000
684
Repairs expense
8,900
688
Telephone expense
3,200
690
Utilities expense
4,600
Totals
$
411,900
$
411,900
O. Tybalt invested $5,000 cash in the business in exchange for more common stock during year 2013 (the December 31, 2012, credit balance of retained earnings was $121,400). Tybalt Construction is required to make a $7,000 payment on its long-term notes payable during 2014.
Required:
1.1
Prepare the income statement for the calendar year 2013
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