Question

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2018, appears below. Account Title Debits Credits Cash 41,350 Accounts receivable 54,000 Supplies 1,650 Inventory 73,000 Note receivable 25,800 Interest receivable 0 Prepaid rent 2,300 Prepaid insurance 0 Office equipment 86,000 Accumulated depreciation—office equipment 32,250 Accounts payable 33,000 Salaries and wages payable 0 Note payable 61,800 Interest payable 0 Deferred revenue 0 Common stock 60,000 Retained earnings 21,000 Sales revenue 213,000 Interest revenue 0 Cost of goods sold 95,850 Salaries and wages expense 18,600 Rent expense 12,650 Depreciation expense 0 Interest expense 0 Supplies expense 1,150 Insurance expense 5,400 Advertising expense 3,300 Totals 421,050 421,050 Information necessary to prepare the year-end adjusting entries appears below. Depreciation on the office equipment for the year is $10,750. Employee salaries and wages are paid twice a month, on the 22nd for salaries and wages earned from the 1st through the 15th, and on the 7th of the following month for salaries and wages earned from the 16th through the end of the month. Salaries and wages earned from December 16 through December 31, 2018, were $1,400. On October 1, 2018, Pastina borrowed $61,800 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years. On March 1, 2018, the company lent a supplier $25,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019. On April 1, 2018, the company paid an insurance company $5,400 for a two-year fire insurance policy. The entire $5,400 was debited to insurance expense. $860 of supplies remained on hand at December 31, 2018. A customer paid Pastina $1,680 in December for 1,400 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue. On December 1, 2018, $2,300 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $1,150 per month.

Answer 1

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