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	40,950
Accounts receivable	43,000
Supplies	1,100
Inventory	63,000
Note receivable	16,800
Interest receivable	0
Prepaid rent	1,200
Prepaid insurance	0
Office equipment	64,000
Accumulated depreciation—office equipment			24,000
Accounts payable			22,000
Salaries and wages payable			0
Note payable			46,800
Interest payable			0
Deferred revenue			0
Common stock			60,000
Retained earnings			16,000
Sales revenue			163,000
Interest revenue			0
Cost of goods sold	73,350
Salaries and wages expense	15,600
Rent expense	6,600
Depreciation expense	0
Interest expense	0
Supplies expense	600
Insurance expense	3,400
Advertising expense	2,200
Totals	331,800		331,800

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

1. Depreciation on the office equipment for the year is $8,000.
2. 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 $900.
3. On October 1, 2018, Pastina borrowed $46,800 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, 2018, the company lent a supplier $16,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.
5. On April 1, 2018, the company paid an insurance company $3,400 for a two-year fire insurance policy. The entire $3,400 was debited to insurance expense.
6. $560 of supplies remained on hand at December 31, 2018.
7. A customer paid Pastina $1,080 in December for 900 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.
8. On December 1, 2018, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $600 per month.

6. Prepare a post-closing trial balance.

PASTINA COMPANY Post-Closing Trial Balance December 31, 2018 Account Title Debits Credits Cash $40,950 Accounts receivable 43,000 Supplies 560 Inventory 63,000 Note receivable 16,800 Interest receivable 1,120 Prepaid rent 600 Prepaid insurance 2,125 Office equipment 64,000 Accumulated depreciation—office equipment $32,000 Accounts payable 22,000 Salaries and wages payable 900 Note payable 46,800 Interest payable 1,404 Deferred revenue 1,080 Common stock 60,000 Retained earnings 16,000 Sales revenue 161,920 Interest revenue 1,120 Cost of goods sold 73,350 Salaries and wages expense 16,500 Rent expense 7,200 Depreciation expense 8,000 Interest expense 1,404 Supplies expense 1,140 Insurance expense 1,275 Advertising expense 2,200 Totals $343,224 $343,224

Answer 1

Pastina Company Journal entries Debit Credit Calculation No. Account $ 8,000 1 Depreciation expense Accumulated Depreciation 8,000 2 Salaries & wages expense 900 Salaries & wages Payable 900 3 Interest expense 1,404 46,800*12%*3/12 Interest Payable 1,404 16,800*8%*10/12 4 Interest Receivable 1,120 $ 1,120 Interest Revenue 3,400/24*(24-9) 2,125 5 Insurance expense $2,125 Prepaid Insurance 6 Supplies expense -1,100-560 540 Supplies 540 7 Sales Revenue 1,080 $ 1,080 Deferred revenue 8 Rent expense 600 Prepaid Rent 600 Closing entries $ 161,920 $ 1,120 1 Sales Revenue Interest Revenue $163,040 Income Summary $ 111,069 2 Income Summary $73,350 $16,500 Cost of goods sold Salaries expense $ Rent expense 7,200 $8,000 Depreciation expense $ Interest expense 1,404 $ Supplies expense 1,140 $ Insurance expense 1,275 $2,200 Advertising expense $51,971 3 Income Summary =163,040-111,069 $ 51,971 Retained Earnings

Pastina Company Unadjusted TB Adjustments Adjusted TB Post Closing TB Credit Debit Credit Debit Credit Debit Credit Debit Account Names Cash 40,950 40,950 40,950 Accounts Receivable 43,000 43,000 43,000 Supplies 1,100 540 560 560 63,000 Inventory 63,000 63,000 Notes Receivable 16,800 16,800 16,800 Interest Receivable 1,120 1,120 1,120 Prepaid Rent 1,200 600 600 600 Prepaid Insurance Office Equipment 2,125 2,125 2,125 64,000 64,000 64,000 Accumulated Depreciation 24,000 8,000 32,000 32,000 Accounts Payable Salaries & wages Payable 22,000 22,000 22,000 900 900 900 Notes Payable 46,800 46,800 46,800 Interest Payable 1,404 1,404 1,404 Deferred revenue 1,080 1,080 1,080 60,000 Common Stock 60,000 60,000 Retained Earnings 16,000 16,000 67,971 Sales Revenue 163,000 1,080 161,920 Interest Revenue 1,120 1,120 Cost of goods sold 73,350 73,350 Salaries & wages expense 15,600 900 16,500 Rent expense 6,600 600 7,200 Depreciation expense 8,000 8,000 Interest expense 1,404 1,404 Supplies expense 600 540 1,140 Insurance expense 3,400 2,125 1,275 Advertising expense 2,200 2,200 Totals 343,224 331,800 331,800 15,769 15,769 343,224 232,155 232,155