Question

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Problem 2-4 (Algo) Accounting cycle; adjusting entries through post-closing trial balance [LO2-4, 2-6, 2-7, 2-8]

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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	36,700
Accounts receivable	43,800
Supplies	3,400
Inventory	63,800
Notes receivable	23,800
Interest receivable	0
Prepaid rent	2,900
Prepaid insurance	9,800
Office equipment	95,200
Accumulated depreciation			35,700
Accounts payable			34,800
Salaries payable			0
Notes payable			53,800
Interest payable			0
Deferred sales revenue			3,900
Common stock			86,600
Retained earnings			38,000
Dividends	7,800
Sales revenue			165,000
Interest revenue			0
Cost of goods sold	89,000
Salaries expense	20,800
Rent expense	12,900
Depreciation expense	0
Interest expense	0
Supplies expense	3,000
Insurance expense	0
Advertising expense	4,900
Totals	417,800		417,800

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

1. Depreciation on the office equipment for the year is $11,900.
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 $1,750.
3. On October 1, 2021, Pastina borrowed $53,800 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 $23,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
5. On April 1, 2021, the company paid an insurance company $9,800 for a one-year fire insurance policy. The entire $9,800 was debited to prepaid insurance.
6. $1,040 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $3,900 in December for 1,700 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $2,900 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,450 per month. The entire amount was debited to prepaid rent.

rev: 09_14_2019_QC_CS-180268, 10_11_2019_QC_CS-184133

Problem 2-4 (Algo) Part 4

4. Prepare an income statement and a statement of shareholders’ equity for the year ended December 31, 2021, and a classified balance sheet as of December 31, 2021. Assume that no common stock was issued during the year and that $7,800 in cash dividends were paid to shareholders during the year.

Complete this question by entering your answers in the tabs below.

• Income Statement
• Statement of SE
• Balance Sheet

Prepare the classified balance sheet for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

	PASTINA COMPANY Balance Sheet At December 31, 2021 Assets 0 0 0 Liabilities and Shareholders' Equity 0 0 $0

Answer 1

165,000 89,000 76,000 Pastina Company Income Statement For year ended December 31, 2021 Sales Revenue Cost of goods sold Gross Profit Operating Expenses Salaries expense Rent expense Depreciation expense Supplies expense Insurance expense Advertising expense Total Operating Expenses Operating Income Other Expense (Income) Interest expense Interest Revenue Total Other Expense (Income) Net Income 22,550 14,350 11,900 5,360 7,350 4,900 66,410 9,590 1,614 (1,587) 27 9,563

Pastina Company Statement of Stockholders equity For year ended December 31, 2021 Balance at Jan 1, 2021 Net Income Dividends Balance at Dec 31, 2021 Common Stock Retained Earnings Total Stockholders equity 86,600 38,000 124,600 9,563 9,563 (7,800) (7,800) 86,600 39,763 126,363

Pastina Company Balance Sheet As of December 31, 2021 Assets Current Assets Cash Accounts Receivable Supplies Inventory Notes Receivable Interest Receivable Prepaid Rent Prepaid Insurance Total Current Assets 36,700 43,800 1,040 63,800 23,800 1,587 1,450 2,450 174,627 Fixed Assets Office Equipment Accumulated Depreciation Net Fixed Assets Total Assets 95,200 (47,600) 47.600 222,227 Liabilities & Stockholders Equity Current Liabilities Accounts Payable Salaries Payable Interest Payable Deferred sales revenue Total Current Liabilities 34,800 1,750 1,614 3,900 42,064 Non-Current Liabilities Notes Payable Total Liabilities 53,800 95,864 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 86,600 39,763 126,363 222,227

Pastina Company Journal entries No. Account 1 Depreciation expense Accumulated Depreciation Credit Calculation Debit $ 11,900 $ 11,900 $ 1,750 2 Salaries expense Salaries Payable $ 1,750 $ 1,614 =53,800*12%*3/12 3 Interest expense Interest Payable $ 1,614 $ 1,587 =23,800*8%*10/12 4 Interest Receivable Interest Revenue $ 1,587 $ 7,350 =9,800/12*9 5 Insurance expense Prepaid Insurance $ 7,350 $ 2,360 =3,400-1,040 6 Supplies expense Supplies $ 2,360 7 No entry $ 1,450 $ 1,450 8 Rent expense Prepaid Rent Closing entries 1 Sales Revenue Interest Revenue Retained Earnings $ 165,000 $ 1,587 $ 166,587 $ 157,024 2 Retained Earnings Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense $ 89,000 $ 22,550 $ 14,350 $ 11,900 $ 1,614 $ 5,360 $ 7,350 $ 4,900 $ 7,800 3 Retained Earnings Dividends $ 7,800

Pastina Company T Accounts Date Debit Date Cash Unadj Bal $ 36,700 Credit Credit Credit Date Debit Date Credit Accounts Receivable Unadj Bal $43,800 Date Debit Date Prepaid Rent Unadj Bal $ 2,900 8 Date Debit Date Prepaid Insurance Unadj Bal $ 9,800 5 $ 1,450 $ 7,350 Adj Bal $ 36,700 Supplies 3,400 Adj Bal $43,800 Inventory Unadj Bal $ 63,800 Adj Bal $ 1,450 Notes Receivable Unadj Bal $ 23,800 Adj Bal $ 2,450 Office Equipment Unadj Bal $ 95,200 Unadj Bal $ 6 $ 2,360 Adj Bal Adj Bal Adj Bal $ 1,040 Interest Receivable $ $ 1,587 Adj Bal $63,800 Accumulated Depreciation Unadj Bal $ 35,700 1 $ 11,900 $23,800 Accounts Payable Unadj Bal $ 34,800 $ 95,200 Salaries Payable Unadj Bal $ - 2 $ 1,750 Unadj Bal 4 Adj Bal $ 1,587 Notes Payable Unadj Bal Adj Bal $ 47,600 Interest Payable Unadj Bal $ 3 $ 1,614 Adj Bal $ 34,800 Deferred sales revenue Unadj Bal $ 3,900 7 $ - Adj Bal $ 1,750 Common Stock Unadj Bal $ 86,600 $ 53,800 $ 53,800 $ 1,614 Adj Bal Retained Earnings Unadj Bal Adj Bal Dividends Unadj Bal $ 7,800 Adj Bal $ 3,900 Sales Revenue Unadj Bal $165,000 7 $ - Adj Bal $ 86,600 Interest Revenue Unadj Bal $ . 4 $ 1,587 $ 38,000 $ 38,000 $165,000 Adj Bal Cost of goods sold 89,000 Adj Bal $ 7,800 Salaries expense Unadj Bal $ 20,800 2 $ 1,750 Adj Bal Rent expense Unadj Bal $ 12,900 8 $ 1,450 Adj Bal $ 1,587 Depreciation expense Unadj Bal $ - 1 $ 11,900 Unadj Bal $ Adj Bal $ 89,000 Interest expense $ $ 1,614 Adj Bal $ 22,550 Supplies expense Unadj Bal $ 3,000 6 $ 2,360 Adj Bal $14,350 Insurance expense Unadj Bal $ - 5 $ 7,350 Adj Bal $ 11,900 Advertising expense Unadj Bal $ 4,900 Unadj Bal 3 Adj Bal $ 1,614 Adj Bal $ 5,360 Adj Bal $ 7,350 Adj Bal $ 4,900

Adjustments Debit Credit Unadjusted TB Debit Credit 36,700 43,800 3,400 63,800 23,800 2,360 1,587 2,900 1,450 7,350 9,800 95,200 11,900 35,700 34,800 1,750 53,800 Pastina Company Account Names Cash Accounts Receivable Supplies Inventory Notes Receivable Interest Receivable Prepaid Rent Prepaid Insurance Office Equipment Accumulated Depreciation Accounts Payable Salaries Payable Notes Payable Interest Payable Deferred sales revenue Common Stock Retained Earnings Dividends Sales Revenue Interest Revenue Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense Totals 1,614 Adjusted TB Debit Credit 36,700 43,800 1,040 63,800 23,800 1,587 1,450 2,450 95,200 47,600 34,800 1,750 53,800 1,614 3,900 86,600 38,000 7,800 165,000 1,587 89,000 22,550 14,350 11,900 1,614 5,360 7,350 4,900 434,651 434,651 3,900 86,600 38,000 7,800 165,000 1,587 89,000 20,800 12,900 1,750 1,450 11,900 1,614 2,360 7,350 3,000 4,900 417,800 417,800 28,011 28,011