Question

Pastina Company sells various types of pasta to grocery chains as private label brands. The company’s reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.

Account Title	Debits			Credits
Cash		33,600
Accounts receivable		41,800
Supplies		2,400
Inventory		61,800
Notes receivable		21,800
Interest receivable		0
Prepaid rent		2,000
Prepaid insurance		6,900
Office equipment		87,200
Accumulated depreciation					32,700
Accounts payable					32,800
Salaries payable					0
Notes payable					51,800
Interest payable					0
Deferred sales revenue					2,900
Common stock					71,700
Retained earnings					33,000
Dividends		5,800
Sales revenue					155,000
Interest revenue					0
Cost of goods sold		79,000
Salaries expense		19,800
Rent expense		11,900
Depreciation expense		0
Interest expense		0
Supplies expense		2,000
Insurance expense		0
Advertising expense		3,900
Totals		379,900			379,900

Information necessary to prepare the year-end adjusting entries appears below.

1. Depreciation on the office equipment for the year is $10,900.
2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,500.
3. On October 1, 2021, Pastina borrowed $51,800 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.
4. On March 1, 2021, the company lent a supplier $21,800 and a note was signed requiring principal and interest at 9% to be paid on February 28, 2022.
5. On April 1, 2021, the company paid an insurance company $6,900 for a two-year fire insurance policy. The entire $6,900 was debited to prepaid insurance.
6. $800 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $2,900 in December for 1,554 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $2,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022, at $1,000 per month. The entire amount was debited to prepaid rent.

Answer 1

Adjusting entries

Date	account and explanation	Debit	credit
Dec 31	Depreciation expense	10900
	Accumulated depreciation-equipment		10900
Dec 31	Salaries expense	1500
	Salaries payable		1500
Dec 31	Interest expense (51800*12%*3/12)	1554
	Interest payable		1554
Dec 31	Interest receivable (21800*9%*10/12)	1635
	Interest revenue		1635
Dec 31	Insurance expense (6900/24*9)	2587.50
	Prepaid insurance		2587.50
Dec 31	Supplies expense (2400-800)	1600
	Supplies		1600
Dec 31	No adjusting entry
Dec 31	Rent expense	1000
	Prepaid rent		1000