Question

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.

   

Account Title	Debits		Credits
Cash	31,400
Accounts receivable	40,200
Supplies	1,600
Inventory	60,200
Notes receivable	20,200
Interest receivable	0
Prepaid rent	1,000
Prepaid insurance	6,200
Office equipment	80,800
Accumulated depreciation			30,300
Accounts payable			31,200
Salaries payable			0
Notes payable			50,200
Interest payable			0
Deferred sales revenue			2,100
Common stock			61,400
Retained earnings			29,000
Dividends	4,200
Sales revenue			147,000
Interest revenue			0
Cost of goods sold	71,000
Salaries expense	19,000
Rent expense	11,100
Depreciation expense	0
Interest expense	0
Supplies expense	1,200
Insurance expense	0
Advertising expense	3,100
Totals	351,200		351,200

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

1. Depreciation on the office equipment for the year is $10,100.
2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $800.
3. On October 1, 2021, Pastina borrowed $50,200 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, 2021, the company lent a supplier $20,200 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
5. On April 1, 2021, the company paid an insurance company $6,200 for a one-year fire insurance policy. The entire $6,200 was debited to prepaid insurance.
6. $500 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $2,100 in December for 800 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $1,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $500 per month. The entire amount was debited to prepaid rent.

Answer 1

Adjusting entries

No	General Journal	Debit	Credit
1	Depreciation expense	10100
	Accumulated Dep-Office equipment		10100
2	Salaries expense	800
	Salaries payable		800
3	Interest expense (50200*12%*3/12)	1506
	Interest payable		1506
4	Interest receivable (20200*8%*10/12)	1347
	Interest revenue		1347
5	Insurance expense (6200/12*9)	4650
	Prepaid insurance		4650
6	Supplies expense (1600-500)	1100
	Supplies		1100
7	No Journal entry
8	Rent expense	500
	Prepaid rent		500