Required information
Problem 2-4 (Algo) Accounting cycle; adjusting entries through post-closing trial balance [LO2-4, 2-6, 2-7, 2-8]
[The following information applies to the questions displayed below.]
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 | 34,100 | |||
Accounts receivable | 42,000 | |||
Supplies | 2,500 | |||
Inventory | 62,000 | |||
Notes receivable | 22,000 | |||
Interest receivable | 0 | |||
Prepaid rent | 1,900 | |||
Prepaid insurance | 8,000 | |||
Office equipment | 88,000 | |||
Accumulated depreciation | 33,000 | |||
Accounts payable | 33,000 | |||
Salaries payable | 0 | |||
Notes payable | 52,000 | |||
Interest payable | 0 | |||
Deferred sales revenue | 3,000 | |||
Common stock | 74,000 | |||
Retained earnings | 33,500 | |||
Dividends | 6,000 | |||
Sales revenue | 156,000 | |||
Interest revenue | 0 | |||
Cost of goods sold | 80,000 | |||
Salaries expense | 19,900 | |||
Rent expense | 12,000 | |||
Depreciation expense | 0 | |||
Interest expense | 0 | |||
Supplies expense | 2,100 | |||
Insurance expense | 0 | |||
Advertising expense | 4,000 | |||
Totals | 384,500 | 384,500 | ||
Information necessary to prepare the year-end adjusting entries appears below.
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 $6,000 in cash dividends were paid to shareholders during the year.
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Pastina | ||
Working for Adjusting Entry | Amount $ | Note |
Note payable | 52,000.00 | A |
Interest rate | 12% | B |
Annual Interest amount | 6,240.00 | C=A*B |
Monthly Interest | 520.00 | D=C/12 |
Interest from Oct to Dec (3 months) | 1,560.00 | E=D*3 |
Note receivable | 22,000.00 | F |
Interest rate | 8% | G |
Annual Interest amount | 1,760.00 | H=F*G |
Monthly Interest | 146.67 | I=H/12 |
Interest from March to Dec (10 months) | 1,466.67 | J=I*10 |
Prepaid Insurance | 8,000.00 | K |
For the period (months) | 12.00 | L |
Monthly Insurance | 666.67 | M=K/L |
Insurance from Apr to Dec (9 months) | 6,000.00 | N=M*9 |
Supplies Expense | ||
Supplies - Opening Balance | 2,500.00 | |
Less: Supplies - Closing Balance | 770.00 | |
Supplies Expense | 1,730.00 | O |
Prepaid Rent | 1,900.00 | P |
Rent for December | 950.00 | Q |
Adjusting Entries | ||
Account | Debit $ | Credit $ |
Depreciation Expense | 11,000.00 | |
Accumulated Depreciation- Equipment | 11,000.00 | |
Salaries Expense | 1,250.00 | |
Salaries Payable | 1,250.00 | |
Interest Expense | 1,560.00 | |
Interest Payable | 1,560.00 | |
Interest Receivable | 1,466.67 | |
Interest Revenue | 1,466.67 | |
Insurance Expense | 6,000.00 | |
Prepaid Insurance | 6,000.00 | |
Supplies Expense | 1,730.00 | |
Supplies | 1,730.00 | |
Rent Expense | 950.00 | |
Prepaid Rent | 950.00 |
Income Statement | ||
Particulars | Amount $ | Amount $ |
Sales Revenue | 156,000.00 | |
Less: returns and allowances | - | |
Net Sales | 156,000.00 | |
Cost of goods sold | 80,000.00 | |
Gross Profit | 76,000.00 | |
Salaries Expense | 21,150.00 | |
Rent Expense | 12,950.00 | |
Depreciation Expense | 11,000.00 | |
Supplies Expense | 3,830.00 | |
Insurance Expense | 6,000.00 | |
Advertising Expense | 4,000.00 | |
Operating Expense | 58,930.00 | |
Operating Income | 17,070.00 | |
Interest Income | 1,466.67 | |
Interest expense | (1,560.00) | |
Other expense and income | (93.33) | |
Net Income | 16,976.67 |
Statement of shareholder's equity | Common Stock | Retained Earnings | Total |
Balance at January 1, 2021 | 74,000.00 | 33,500.00 | 107,500.00 |
Net Income for the year | - | 16,976.67 | 16,976.67 |
Dividend | - | 6,000.00 | 6,000.00 |
Balance at December 31, 2021 | 74,000.00 | 44,476.67 | 118,476.67 |
Balance Sheet | Amount $ | Amount $ |
Current Assets | ||
Cash | 34,100.00 | |
Accounts Receivable | 42,000.00 | |
Inventory | 62,000.00 | |
Supplies | 770.00 | |
Notes Receivable | 22,000.00 | |
Interest Receivable | 1,466.67 | |
Prepaid Rent | 950.00 | |
Prepaid Insurance | 2,000.00 | |
Total Current Assets | 165,286.67 | |
Non Current Assets | ||
Office Equipment |
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