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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 5

5. Prepare closing entries. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

Answer 1

Step 1: Passing of Adjusting Entries

Step 2: Preparing the Adjusted Trail Balance

Step 3: Passing the Closing Entries

Step 4: Preparing the post closing trail balance

In my working the Adjusted Trail balance and post closing trail balance is shown in step 2 only.

Credit Debit $11,900 $11,900 $1,750 $1,750 $1,614 $1,614 Step 1 Adjusting Entries Sr. No. Particulars Depreciation Expense Accumulated Depreciation - Office Equipment (To record service revenue) 2 Salaries and Wages Expense Salaries and Wages Payable (To record salaries expense) Interest Expense Interest Payable (To record accrual of interest Expense) Interest Receivable Interest Revenue (To record interest revenue) Insurance Expense Prepaid Insurance (To record prepaid insurance) Supplies Expense Supplies (To record supplies expense) No entry Rquired No entry Rquired $1,587 $1,587 $7,350 $7,350 $2,360 $2,360 $1,450 $1,450 Rent Expense Prepaid Rent (To record rent expense) Working Supplies Expense 1 Interest Expense Amount Borrowed Rate Interest Expense [ Oct 21 to Dec 21] ($50600x12%/12x3] $53,800 12% $1,614 2 Interest Revenue Amount lend Rate Interest Expense [Mar 21 to Dec 21] ($20600x8%/12x10] $23,800 8% $1,587

3 Prepaid Insurance Amount paid for 2 year insurance Expense for 2018 [Apr 21 to Dec 21] ($9800/12x9] $9,800 $7,350 4 Supplies Expense Supplies Account Balance Less: Supplies on hand Supplies Expense $3,400 ($1,040) $2,360

Step2l Pastina Company Entry Adjustment Debit Credit Impact of Closing Entries Debit Credit Unadjusted Trial Balance December 31, 2021 Debit Credit $36,700 $43,800 $3,400 $63,800 %%%%% $2,360 $23,800 $2,900 $9,800 $95,200 $11,900 $35,700 $34,800 Post Closing Trail Balance December 31, 2021 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 $47,563 $7,800 $1,750 Particulars Cash Accounts Receivable Supplies Inventory Note Receivable Interest Receivable Prepaid rent Prepaid Insurance Office Equipment Accumulated Depreciation - Office Equipment Accounts Payable Salaries and Wages Payable Notes Payable Interest Payable Deferred Revenue Common Stock Retained Earnings Dividend Sales Revenue Interest Revenue Cost of Good Sold Salaries and Wages Expense Rent Expense Depreciation Expense Interest Expense Supplies Expense Insurance Expense Advertisement Expense $53,800 Adjusted Trail Balance December 31, 2021 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 $1,65,000 $1,587 $89,000 $22,550 $14,350 $11,900 $1,614 $5,360 $7,350 $4,900 $4,34,651 $4,34,651 98%%%%%%%%%%%%%% $3,900 $86,600 $38,000 $7,800 $0 $1,65,000 $1,65,000 $1,587 so $89,000 $20,800 $12,900 $1,750 $1,450 $11,900 $1,614 $2,360 $7,350 88888888888888 $89,000 $22,550 $14,350 $11,900 $1,614 $5,360 $7,350 $4,900 $1,66,587 $3,000 SO $4,900 $4,17,800 $4,17,800 $28,011 $28,011 $1,66,587 $2,77,627 $2,77,627

Credit Debit $1,65,000 $1,587 $1,66,587 $1,57,024 Step 3 Closing Entries Date Particulars 31-Dec-21 Sales Revenue Interest Revenue Income Summary (To close Service Revenue Account) 31-Dec-21 Income Summary Cost of Good Sold Salaries and Wages Expense Rent Expense Depreciation Expense Interest Expense Supplies Expense Insurance Expense Advertisement Expense (To close all expense accounts) 31-Dec-21 Income Summary Retained Earnings (To close the Income Summary Account) 31-Dec-21 Retained Earnings Dividend (To close the dividend account) $89,000 $22,550 $14,350 $11,900 $1,614 $5,360 $7,350 $4,900 $9,563 $9,563 $7,800 $7,800