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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.

For requirement 4, assume that no common stock was issued during the year and that $4,000 in cash dividends were paid to shareholders during the year.

4. Prepare the income statement, statement of shareholders' equity and classified balance sheet for the year ended December 31, 2018.
  

Answer 1

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Working-1
	Unadjusted Trial		Adjustment		Adjusted Trial
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	30000			4000	26000
Accounts Receivable	40000				40000
Supplies 1500-800	1500			700	800
Inventory	60000				60000
Note Receivable	20000				20000
Interest Receivable 20000*8%*10 Months	0		1333		1333
Prepaid Rent	2000			1000	1000
Prepaid Insurance 6000/24*9	0		6000	2250	3750
Office Equipment	80000				80000
Accumulated Depreciation		30000		10000		40000
Accounts Payable		31000				31000
Salary Payable		0		1500		1500
Note Payable		50000				50000
Interest Payable 50000*12%*3 Months		0		1500		1500
Deferred Revenue		0		2000		2000
Common Stock		60000				60000
Retained Earning		24500	4000			20500
Sales Revenue		148000	2000			146000
Interest Revenue		0		1333		1333
Cost of Goods Sold	70000				70000
Salaries Expense	18900		1500		20400
Rent Expense	11000		1000		12000
Depreciation Expense	0		10000		10000
Interest Expense	0		1500		1500
Supplies Expense	1100		700		1800
Insurance Expense	6000		2250	6000	2250
Advertising	3000				3000
	343500	343500	30283	30283	353833	353833
Income Statement:
Sales Revenue			146000
Less:
Cost of Goods Sold			70000
Gross Margin			76000
Less: Expenses
Salaries Expense			20400
Rent Expense			12000
Depreciation Expense			10000
Supplies Expense			1800
Insurance Expense			2250
Advertising			3000
Operating Income	76000-Expense		26550
Add: Other Revenue
Interest Revenue			1333
Less: Other Expense
Interest Expense			1500
Net Income before tax			26383
Statement of Shareholder Equity:
Common Stock		60000
Retained Earning, beginning	24500
add: Net Income	26383
Less: Dividend	4000
Retained Earning, ending		46883
Total Stockholder Equity, ending		106883
Classified Balance Sheet
Assets:
Current Asset:
Cash		26000
Accounts Receivable		40000
Supplies 1500-800		800
Inventory		60000
Note Receivable		20000
Interest Receivable 20000*8%*10 Months		1333
Prepaid Rent		1000
Prepaid Insurance 6000/24*9		3750
Total Current Assets			152883
Office Equipment		80000
Les:Accumulated Depreciation		40000	40000
Total Assets			192883
Liabilities:
Current Liabilities:
Accounts Payable		31000
Salary Payable		1500
Interest Payable 50000*12%*3 Months		1500
Deferred Revenue		2000
Tota Current Liabilities			36000
Note Payable		50000	50000
Total Liabilities			86000
Equity:
Common Stock		60000
Retained Earning, ending		46883
Total Equity			106883
Total Equity and Liabilities			192883