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.
  

Account Title	Debits		Credits
Cash	30,000
Accounts receivable	40,000
Supplies	1,500
Inventory	60,000
Notes receivable	20,000
Interest receivable	0
Prepaid rent	2,000
Prepaid insurance	6,000
Office equipment	80,000
Accumulated depreciation			30,000
Accounts payable			31,000
Salaries payable			0
Notes payable			50,000
Interest payable			0
Deferred sales revenue			2,000
Common stock			60,000
Retained earnings			28,500
Dividends	4,000
Sales revenue			146,000
Interest revenue			0
Cost of goods sold	70,000
Salaries expense	18,900
Rent expense	11,000
Depreciation expense	0
Interest expense	0
Supplies expense	1,100
Insurance expense	0
Advertising expense	3,000
Totals	347,500		347,500

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

1. Depreciation on the office equipment for the year is $10,000.
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 $1,500.
3. On October 1, 2021, Pastina borrowed $50,000 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 $20,000, 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 $6,000 for a one-year fire insurance policy. The entire $6,000 was debited to prepaid insurance.
6. $800 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $2,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,000 per month. The entire amount was debited to prepaid rent.

rev: 09_14_2019_QC_CS-180268

Required:
1. & 2. Post the unadjusted balances and adjusting entires into the appropriate t-accounts. (Enter the number of the adjusting entry in the column next to the amount. Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
  

Answer 1

	Journal Entries
	1) Depreciation A/c dr			$10,000
		To Accumulated Depreciation A/c		$10,000
	2) Salary Expense A/c dr			$1,500
		To Salary Payable				$1,500
	3)Interest Expense A/c dr			$1,500
	($50000*12%*3/12)
	(interest accrued for 3 months from Oct to Dec)
		To Interest Payable				$1,500
	4)Interest Receivable A/c dr			$1,333.33
	($20000*8%*10/12)
	(10 months interest from March to Dec )
		To Interest Revenue A/c			$1,333.33
	5)Insurance Expense A/c Dr			$4,500
	($6000*9/12)
	(Insurance Expenses recorded for 9 months)
		To Prepaid Insurance A/c			$4,500
	6)Supplies Expense A/c Dr			$700
	($1500-$800)
	(Closing minus opening= Consumed Supplies)
		To Supplies A/c				$700
	7)Deferred Sales revenue Dr			$2,000
		To Advance from Customer			$2,000
	8)Rent Expense A/c Dr			$1,000
		To Prepaid Rent A/c				$1,000
1)		Accumulated Depreciation A/c
			By Balance B/f			$30,000
			By depreciation A/c		$10,000
To balance C/f		$40,000
		$40,000				$40,000
1)		Depreciation A/c
To Acc Dep		$10,000
			By trf to P&l		$10,000
		$10,000				$10,000
2)		Salary Expenses A/c
To Salary payable		$1,500
			By trf to P&L		$1,500
		$1,500				$1,500
2)		Salary Payable A/c
			By Salary expense		$1,500
To bal c/f		$1,500
		$1,500				$1,500
3)		Interest Expenses A/c
To Interest payable		$1,500
			By trf to P&L		$1,500
		$1,500				$1,500
3)		Interest Payable A/c
			By Interest expense		$1,500
To bal c/f		$1,500
		$1,500				$1,500
4)		Interest Revenue A/c
			By interest Receivable	$1,333
To trf to P&L		$1,333
		$1,333				$1,333
4)		Interest Receivable A/c
To interest Revenue		$1,333
			By bal c/f			$1,333
		$1,333				$1,333
5)		Insurance expense a/c
To Prepaid Insurance		$4,500
			By trf to P&L		$4,500
		$4,500				$4,500
5)		Prepaid Insurance A/c
To opening bal		$6,000	By Insurance expenses	$4,500
			By bal c/f			$1,500
		$6,000				$6,000
6)		Supplies Expenses A/c
To supplies A/c		$700
			By trf to P&L		$700
		$700				$700
6)		Supplies A/c
To opening Bal		$1,500	By Supplies expense A/c	$700
			By bal c/f			$800
		$1,500				$1,500
7)		Deferred Sales revenue
To advance from customer	$2,000	By opening bal		$2,000
		$2,000				$2,000
7)		Advance from customer A/c
			By deferred Sales revenue	$2,000
To Bal c/f		$2,000
		$2,000				$2,000
8)		Rent Expenses A/c
To prepaid Rent A/c		$1,000
			By trf to P&L		$1,000
		$1,000				$1,000
8)		Prepaid Rent Account A/c
To opening bal		$2,000	By Rent			$1,000
			By bal c/f			$1,000
		$2,000				$2,000