Thursday, 7 May 2015

Pastina Company manufactures and 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, 2013, appears below.

Pastina Company manufactures and 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, 2013, appears below.
  
  Account Title Debits Credits
  Cash   21,000        
  Accounts receivable   31,000        
  Supplies   1,600        
  Inventory   51,000        
  Note receivable   11,000        
  Interest receivable   0        
  Prepaid rent   2,200        
  Prepaid insurance   0        
  Equipment   88,000        
  Accumulated depreciation—equipment         33,000  
  Accounts payable         22,000  
  Wages payable         0  
  Note payable         41,000  
  Interest payable         0  
  Unearned revenue         0  
  Common stock         51,000  
  Retained earnings         19,120  
  Sales revenue         139,000  
  Interest revenue         0  
  Cost of goods sold   61,000        
  Wage expense   18,000        
  Rent expense   12,100        
  Depreciation expense   0        
  Interest expense   0        
  Supplies expense   1,200        
  Insurance expense   4,920        
  Advertising expense   2,100        
  





          Totals   305,120     305,120  
  












  
  Information necessary to prepare the year-end adjusting entries appears below.
      
1. Depreciation on the equipment for the year is $11,000.
2.
Employee wages are paid twice a month, on the 22nd for wages earned from the 1st through the 15th, and on the 7th of the following month for wages earned from the 16th through the end of the month. Wages earned from December 16 through December 31, 2013, were $1,600.
3.
On October 1, 2013, Pastina borrowed $41,000 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, 2013, the company lent a supplier $11,000 and a note was signed requiring principal and interest at 9% to be paid on February 28, 2014.
5.
On April 1, 2013, the company paid an insurance company $4,920 for a two-year fire insurance policy. The entire $4,920 was debited to insurance expense.
6.
$700 of supplies remained on hand at December 31, 2013.
7.
A customer paid Pastina $1,100 in December for 1,230 pounds of spaghetti to be manufactured and delivered in January 2014. Pastina credited sales revenue.
8.
On December 1, 2013, $2,200 rent was paid to the owner of the building. The payment represented rent for December and January 2014, at $1,100 per month.
    
Required:
Prepare the necessary December 31, 2013, adjusting journal entries. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
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Explanation:
Interest expense ($41,000 × 12% × 3/12) = $1,230
Interest receivable ($11,000 × 9% × 10/12) = $825
Prepaid insurance ($4,920 × 15/24) = $3,075
Supplies expense ($1,600 − $700) = $900

   

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