Question

Pastina Company sells varlous types of pasta to grocery chains as private label brands. The company's reporting year-end Is December 31. The unadjusted trlal balance as of December 31, 2021, appears below. Account Title Debits Credits Cash 32,6ee 41,000 Accounts receivable Supplies Inventory 2.008 61,08e 21,08e Notes receivable Interest receivable Prepaid rent Prepaid insurance Office equipment Accumulated depreciation Accounts payable Salaries payable Notes payable 1.488 7,008 84,000 31,5ee 32,eee 51,eee Interest payable Deferred sales revenue 2,508 67,08e 31,08e Comon stock Retained earnings Dividends 5,008 Sales revenue 151,000 Interest revenue 75,00e 19,40e Cost of goods sold Salaries expenser Rent expense Depreciation expense Interest expenses 11.500 Supplies expense Insurance expense Advertising expense 1,600 3,500 366,00e 366,000 Totals Information necessary to prepare the year-end adjusting entries appears below.

. 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 $5,000 in cash dividends were paid to shareholders during the year.

Answer 1

Pastina Company Income Statement For year ended Dec 31 Sales Revenue 151,000 Cost of goods sold 75,000 Gross Profit 76,000 Operating Expenses Salaries expense 20,400 Rent expense 12,200 Depreciation expense 10,500 Supplies expense 2,980 Insurance expense 2,625 Advertising expense 3,500 Total Operating Expenses 52,205 Operating Income 23,795 Other Expense (Income) Interest expense 1,530 (1,400) Interest Revenue Total Other Expense (Income) 130 Net Income 23,665

Pastina Company Balance Sheet As of Dec 31 Assets Current Assets Cash 32,600 Accounts Receivable 41,000 Supplies 620 Inventory 61,000 Notes Receivable 21,000 Interest Receivable 1,400 Prepaid Rent 700 Prepaid Insurance 4,375 Total Current Assets 162,695 Fixed Assets Office Equipment 84,000 Accumulated Depreciation (42,000) Net Fixed Assets 42,000 Total Assets 204,695 Liabilities & Stockholders Equity Current Liabilities Accounts Payable Salaries Payable 32,000 1,000 Interest Payable 1,530 Deferred sales revenue 2,500 Total Current Liabilities 37,030 Non-Current Liabilities Notes Payable 51,000 Total Liabilities 88,030 Stockholders Equity Common Stock 67,000 Retained earnings 49,665 Total Stockholders Equity 116,665 Total Liabilities & Stockholders Equity 204,695

Pastina Company Statement of changes in equity For year ended Dec 31 Common Stock Retained Earnings Total Stockholders equity Balance at Jan 1, 2021 67,000 31,000 98,000 Profit for the year Dividend paid Balance at Dec 31, 2021 23,665 23,665 (5,000) (5,000) 49,665 67,000 116,665

Pastina Company Journal entries Debit Credit Calculation No. Account $10,500 1 Depreciation expense Accumulated Depreciation $10,500 2 Salaries expense 1,000 Salaries Payable $ 1,000 3 Interest expense 1,530 -51000*12% 3/12 Interest Payable 1,530 4 Interest Receivable 21000*8%*10/12 1,400 Interest Revenue 1,400 7000/24*9 5 Insurance expense 2,625 $2,625 Prepaid Insurance 6 Supplies expense 1,380 -2000-620 Supplies 1,380 7 No entry 8 Rent expense 700 Prepaid Rent 700 Closing entries $151,000 1 Sales Revenue 1,400 Interest Revenue $152,400 Income Summary $ 128,735 2 Income Summary $ 75,000 $ 20,400 $ 12,200 Cost of goods sold Salaries expense Rent expense $10,500 Depreciation expense $ Interest expense 1,530 $ 2,980 Supplies expense Insurance expense 2,625 $3,500 Advertising expense $ 23,665 3 Income Summary 152400-128735 $ 23,665 Retained Earnings 4 Retained Earnings 5,000 $5,000 Dividends «л

Pastina Company Unadjusted TB Adjustments Adjusted TB Post Closing TB Credit Debit Credit Debit Credit Debit Credit Debit Account Names Cash 32,600 32,600 32,600 41,000 Accounts Receivable 41,000 41,000 Supplies 1,380 2,000 620 620 61,000 61,000 Inventory 61,000 Notes Receivable 21,000 21,000 21,000 1,400 1,400 Interest Receivable 1,400 Prepaid Rent 1,400 700 700 700 Prepaid Insurance Office Equipment 7,000 2,625 4,375 4,375 84,000 84,000 84,000 Accumulated Depreciation 31,500 10,500 42,000 42,000 Accounts Payable Salaries Payable 32,000 32,000 32,000 1,000 1,000 1,000 Notes Payable 51,000 51,000 51,000 Interest Payable 1,530 1,530 1,530 Deferred sales revenue 2,500 2,500 2,500 Common Stock 67,000 67,000 67,000 Retained Earnings 31,000 31,000 49,665 Dividends 5,000 5,000 Sales Revenue 151,000 151,000 Interest Revenue 1,400 1,400 75,000 Cost of goods sold 75,000 Salaries expense 1,000 19,400 20,400 11,500 12,200 Rent expense 700 Depreciation expense 10,500 10,500 Interest expense 1,530 1,530 Supplies expense 2,980 1,600 1,380 Insurance expense 2,625 2,625 Advertising expense 3,500 3,500 Totals 366,000 366,000 19,135 19,135 380,430380,430 246,695 246,695