Question

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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	41,750
Accounts receivable	53,000
Supplies	1,600
Inventory	72,000
Note receivable	24,900
Interest receivable	0
Prepaid rent	2,200
Prepaid insurance	0
Office equipment	84,000
Accumulated depreciation—office equipment			31,500
Accounts payable			32,000
Salaries and wages payable			0
Note payable			60,900
Interest payable			0
Deferred revenue			0
Common stock			60,000
Retained earnings			20,500
Sales revenue			208,000
Interest revenue			0
Cost of goods sold	93,600
Salaries and wages expense	18,300
Rent expense	12,100
Depreciation expense	0
Interest expense	0
Supplies expense	1,050
Insurance expense	5,200
Advertising expense	3,200
Totals	412,900		412,900

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

Depreciation on the office equipment for the year is $10,500.

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 $1,350.

On October 1, 2018, Pastina borrowed $60,900 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 $24,900 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 $5,200 for a two-year fire insurance policy. The entire $5,200 was debited to insurance expense.

$830 of supplies remained on hand at December 31, 2018.

A customer paid Pastina $1,620 in December for 1,350 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

On December 1, 2018, $2,200 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $1,100 per month.

3. Prepare an adjusted trial balance.

Answer 1

Trial Balance	Unadjusted		Adjustments		Adjusted Trial Balance
Account Title	Debits	Credits	Debits	Credits	Debits	Credits
Cash	$41,750.00				$41,750.00
Accounts receivable	$53,000.00				$53,000.00
Supplies	$1,600.00			$770.00	$830.00
Inventory	$72,000.00				$72,000.00
Note receivable	$24,900.00				$24,900.00
Interest receivable	$0.00		$1,660.00		$1,660.00
Prepaid rent	$2,200.00			$1,100.00	$1,100.00
Prepaid insurance	$0.00		$3,250.00		$3,250.00
Office equipment	$84,000.00				$84,000.00
Accumulated depreciation—office equipment		$31,500.00		$10,500.00		$42,000.00
Accounts payable		$32,000.00				$32,000.00
Salaries and wages payable		$0.00		$1,350.00		$1,350.00
Note payable		$60,900.00				$60,900.00
Interest payable		$0.00		$1,827.00		$1,827.00
Deferred revenue		$0.00		$1,620.00		$1,620.00
Common stock		$60,000.00				$60,000.00
Retained earnings		$20,500.00				$20,500.00
Sales revenue		$208,000.00	$1,620.00			$206,380.00
Interest revenue		$0.00		$1,660.00		$1,660.00
Cost of goods sold	$93,600.00				$93,600.00
Salaries and wages expense	$18,300.00		$1,350.00		$19,650.00
Rent expense	$12,100.00		$1,100.00		$13,200.00
Depreciation expense	$0.00		$10,500.00		$10,500.00
Interest expense	$0.00		$1,827.00		$1,827.00
Supplies expense	$1,050.00		$770.00		$1,820.00
Insurance expense	$5,200.00			$3,250.00	$1,950.00
Advertising expense	$3,200.00				$3,200.00
Totals	$412,900.00	$412,900.00	$22,077.00	$22,077.00	$428,237.00	$428,237.00
Working
Interest payable on note payable = [$60900 * 12% / 12 months] * 3 months =$1827
Interest receivable note receivable = [$24900 * 8% / 12 months] * 10 months =$1660