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.

Credits Debits 35,500 43,000 3,000 63,000 23,000 2,500 9,000 92,000 34,500 34,000 53,000 Account Title 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 3,500 81,000 36,000 7,000 161,000 85,000 20,400 12,500 2,600 4,500 403,000 403,000 Information necessary to prepare the year-end adjusting entries appears below. 1. Depreciation on the office equipment for the year is $11,500. 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 $1,550. 3. On October 1, 2021, Pastina borrowed $53,000 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 $23,000 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 $9,000 for a one-year fire insurance policy. The entire $9,000 was debited to prepaid insurance. 6. $920 of supplies remained on hand at December 31, 2021. 7. A customer paid Pastina $3,500 in December for 1,500 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.

Answer 1

Adjusted trial balance is as follows:

Unadjusted	Unadjusted trial balance		Adjustments		Adjusted trial balance
Account Title	Debits	Credits	Debits	Credits	Debits	Credits
Cash	35500				35500
Accounts receivable	43000				43000
Supplies (3000 - 920)	3000			2080	920
Inventory	63000				63000
Note receivable	23000				23000
Interest receivable	0		1533		1533
Prepaid rent	2500			1250	1250
Prepaid insurance (9000*9/12)	9000			6750	2250
Office equipment	92000				92000
Accumulated depreciation-office equipment		34500		11500		46000
Accounts payable		34000				34000
Salaries and wages payable		0		1550		1550
Note payable		53000				53000
Interest payable		0		1590		1590
Deferred revenue		3500		3500		7000
Common stock		81000				81000
Retained earnings		36000				36000
Dividends	7000				7000
Sales revenue		161000	3500			157500
Interest revenue (23000*0.08*10/12)		0		1533		1533
Cost of goods sold	85000				85000
Salaries and wages expense	20400		1550		21950
Rent expense	12500		1250		13750
Depreciation expense	0		11500		11500
Interest expense (53000*12*3/12)	0		1590		1590
Supplies expense	2600		2080		4680
Insurance expense	0		6750		6750
Advertising expense	4500				4500
Totals	403000	403000	29753	29753	419173	419173