[The following information applies to the questions displayed below.] Pastina Co

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[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 fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2018, appears below.

   

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

Depreciation on the office equipment for the year is $8,000.

Employee salaries and wages are paid twice a month, on the 22nd for salaries and wages earned from the 1st through the 15th, and on the 7th of the following month for salaries and wages earned from the 16th through the end of the month. Salaries and wages earned from December 16 through December 31, 2018, were $900.

On October 1, 2018, Pastina borrowed $46,800 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.

On March 1, 2018, the company lent a supplier $16,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.

On April 1, 2018, the company paid an insurance company $3,400 for a two-year fire insurance policy. The entire $3,400 was debited to insurance expense.

$560 of supplies remained on hand at December 31, 2018.

A customer paid Pastina $1,080 in December for 900 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

On December 1, 2018, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $600 per month.

6. Prepare a post-closing trial balance.

Account Title Debits Credits Cash 40,950 Accounts receivable 43,000 Supplies 1,100 Inventory 63,000 Note receivable 16,800 Interest receivable 0 Prepaid rent 1,200 Prepaid insurance 0 Office equipment 64,000 Accumulated depreciation—office equipment 24,000 Accounts payable 22,000 Salaries and wages payable 0 Note payable 46,800 Interest payable 0 Deferred revenue 0 Common stock 60,000 Retained earnings 16,000 Sales revenue 163,000 Interest revenue 0 Cost of goods sold 73,350 Salaries and wages expense 15,600 Rent expense 6,600 Depreciation expense 0 Interest expense 0 Supplies expense 600 Insurance expense 3,400 Advertising expense 2,200 Totals 331,800 331,800

Explanation / Answer

1.   Depreciation expense.............................................      8,000

          Accumulated depreciation..................................                     8,000

2.   Wage expense.......................................................         900

          Wages payable...................................................                        900

3.   Interest expense ($46,800 x 12% x 3/12)......................      1,404

          Interest payable..................................................                     1,404

4.   Interest receivable ($16,800 x 8% x 10/12)...................      1,120

          Interest revenue.................................................                     1,120

5.   Prepaid insurance ($3,400 x 15/24)............................      2,125

          Insurance expense..............................................                     2,125

6.   Supplies expense ($1,100 - 560)................................         540

          Supplies............................................................                        540

7.   Sales revenue........................................................      1,080

          Unearned revenue..............................................                     1,080

8.   Rent expense.........................................................         600

          Prepaid rent ......................................................                        600

Adjustments Adjusted Account Title Debits Credits Debits Credits Debits Credits Cash 40,950            40,950 Accounts receivable 43,000            43,000 Supplies 1,100                540                  560 Inventory 63,000            63,000 Note receivable 16,800            16,800 Interest receivable 0            1,120              1,120 Prepaid rent 1,200                600                  600 Prepaid insurance 0            2,125              2,125 Office equipment 64,000            64,000 Accumulated depreciation—office equipment 24,000            8,000            32,000 Accounts payable 22,000            22,000 Salaries and wages payable 0                900                  900 Note payable 46,800            46,800 Interest payable 0            1,404              1,404 Deferred revenue 0            1,080              1,080 Common stock 60,000            60,000 Retained earnings 16,000            16,000 Sales revenue 163,000            1,080          161,920 Interest revenue 0            1,120              1,120 Cost of goods sold 73,350            73,350 Salaries and wages expense 15,600                900            16,500 Rent expense 6,600                600              7,200 Depreciation expense 0            8,000              8,000 Interest expense 0            1,404              1,404 Supplies expense 600                540              1,140 Insurance expense 3,400            2,125              1,275 Advertising expense 2,200              2,200 Totals 331,800 331,800          15,769          15,769          343,224          343,224

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