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	30,000
Accounts receivable	40,000
Supplies	1,500
Inventory	60,000
Note receivable	20,000
Interest receivable	0
Prepaid rent	2,000
Prepaid insurance	0
Office equipment	80,000
Accumulated depreciation—office equipment			30,000
Accounts payable			31,000
Salaries and wages payable			0
Note payable			50,000
Interest payable			0
Deferred revenue			0
Common stock			60,000
Retained earnings			24,500
Sales revenue			148,000
Interest revenue			0
Cost of goods sold	70,000
Salaries and wages expense	18,900
Rent expense	11,000
Depreciation expense	0
Interest expense	0
Supplies expense	1,100
Insurance expense	6,000
Advertising expense	3,000
Totals	343,500		343,500

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 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 $1,500.

3. On October 1, 2018, 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, 2018, the company lent a supplier $20,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.

5. On April 1, 2018, the company paid an insurance company $6,000 for a two-year fire insurance policy. The entire $6,000 was debited to insurance expense.

6. $800 of supplies remained on hand at December 31, 2018.

7. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

8. On December 1, 2018, $2,000 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019 at $1,000 per month.

6. Prepare a post-closing trial balance.
  

Answer 1

Trial Balance
	Pre-Closing		Adjustment		Post-Closing
Account Title	Debits	Credits	Debits	Credits	Debits	Credits
Cash	30,000				30,000	-
Accounts receivable	40,000				40,000	-
Supplies	1,500		(700)		800	-
Inventory	60,000				60,000	-
Note receivable	20,000				20,000	-
Interest receivable	-		1,333		1,333	-
Prepaid rent	2,000		(1,000)		1,000	-
Prepaid insurance	-		3,750		3,750	-
Office equipment	80,000				80,000	-
Accumulated depreciation—office equipment		30,000		10,000	-	40,000
Accounts payable		31,000			-	31,000
Salaries and wages payable		-		1,500	-	1,500
Note payable		50,000			-	50,000
Interest payable		-		1,500	-	1,500
Deferred revenue		-		2,000	-	2,000
Common stock		60,000			-	60,000
Retained earnings		24,500			-	24,500
Sales revenue		148,000		(2,000)	-	146,000
Interest revenue		-		1,333	-	1,333
Cost of goods sold	70,000				70,000	-
Salaries and wages expense	18,900		1,500		20,400	-
Rent expense	11,000		1,000		12,000	-
Depreciation expense	-		10,000		10,000	-
Interest expense	-		1,500		1,500	-
Supplies expense	1,100		700		1,800	-
Insurance expense	6,000		(3,750)		2,250	-
Advertising expense	3,000				3,000	-
Totals	343,500	343,500	14,333	14,333	357,833	357,833