Question

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.

Account Title	Debits			Credits
Cash		29,000
Accounts receivable		39,000
Supplies		1,400
Inventory		59,000
Note receivable		19,000
Interest receivable		0
Prepaid rent		2,400
Prepaid insurance		0
Office equipment		96,000
Accumulated depreciation—office equipment					36,000
Accounts payable					30,000
Salaries and wages payable					0
Note payable					49,000
Interest payable					0
Deferred revenue					0
Common stock					59,000
Retained earnings					35,580
Sales revenue					147,000
Interest revenue					0
Cost of goods sold		69,000
Salaries and wages expense		18,800
Rent expense		13,200
Depreciation expense		0
Interest expense		0
Supplies expense		1,000
Insurance expense		5,880
Advertising expense		2,900
Totals		356,580			356,580

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

1. Depreciation on the office equipment for the year is $12,000.

2. 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 $1,400.

3. On October 1, 2018, Pastina borrowed $49,000 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, 2018, the company lent a supplier $19,000 and a note was signed requiring principal and interest at 9% to be paid on February 28, 2019.

5. On April 1, 2018, the company paid an insurance company $5,880 for a two-year fire insurance policy. The entire $5,880 was debited to insurance expense.

6. $900 of supplies remained on hand at December 31, 2018.

7. A customer paid Pastina $1,900 in December for 1,470 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

8. On December 1, 2018, $2,400 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $1,200 per month.

Required:
Prepare the necessary December 31, 2018, adjusting journal entries.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Answer 1

Journal

1	Depreciation expense	12,000
	Accumulated depreciation - Equipment		12,000
2	Salaries expense	1,400
	Salaries payable		1,400
3	Interest expense	1,470
	Interest payable		1,470
4	Interest receivable	1,425
	Interest revenue		1,425
5	Prepaid insurance	3,920
	Insurance expense		3,920
6	Supplies expense	500
	Supplies		500
7	Sales revenue	1,900
	Deferred revenue		1,900
8	Rent expense	1,200
	Prepaid rent		1,200

Interest expense = 49,000 x 12% x 3/12

= $1,470

Interest revenue = 19,000 x 9% x 10/12

= $1,425

Insurance expense for 9 months = 5,880 x 9/24

= $1,960

Prepaid insurance on December 31 = 5,880 - 1,960

= $3,920