Pastina Company sells various types of pasta to grocery chains as private label
ID: 2331912 • Letter: P
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 Debits Credits Account Title Cash Accounts receivable Supplies Inventory Note receivable Interest receivable Prepaid rent Prepaid insurance Office equipment Accumulated depreciation-office equipment Accounts payable Salaries and wages payable Note payable Interest payable Deferred revenue Common stock Retained earnings Sales revenue Interest revenue Cost of goods sold Salaries and wages expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense Totals 39,200 48,000 1,350 68,000 21,300 1,700 74,000 27,750 27,000 51,300 60,000 18,500 188,000 84,600 17,100 9,350 850 4,400 2.700 372,550 372,550 Information necessary to prepare the year-end adjusting entries appears below 1. Depreciation on the office equipment for the year is $9,250 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 $1,150 . On October 1, 2018, Pastina borrowed $51,300 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 yearsExplanation / Answer
Answers
>Step 1: Find adjusted balance and prepare Adjusted Trial Balance.
>Step 2: Prepare Income Statement using Adjusted Balances.
>Step 3: Find Net Income (Loss) balance in Income Statement.
>Step 4: Add Net Income balance to Retained Earnings OR Deduct Net Loss balance from retained earnings.
>Step 5: Prepare Closing Trial Balance, with updated Retained Earnings balance as per Step 4, and putting balances of all the accounts that were used in Income Statement equal to $ 0.
Unadjusted Balances [as given]
Effects of Adjustments
ADJUSTED TRIAL BALANCE
Accounts title
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 39,200.00
$ 39,200.00
Accounts receivables
$ 48,000.00
$ 48,000.00
Supplies
$ 1,350.00
$ 640.00 (6) [1350 – 710]
$ 710.00
Inventory
$ 68,000.00
$ 68,000.00
Notes receivables
$ 21,300.00
$ 21,300.00
Interest Receivables
$ -
$ 1,420.00 (4) [21300 x 8% x 10/12]
$ 1,420.00
Prepaid Rent
$ 1,700.00
$ 850.00 (8) [Rent of Dec expired]
$ 850.00
Prepaid Insurance
$ -
$ 2,750.00 (5) [4400 x 15months/24months]
$ 2,750.00
Office Equipment
$ 74,000.00
$ 74,000.00
Accumulated Depreciation Office Equipment
$ 27,750.00
$ 9,250.00 (1)
$ 37,000.00
Accounts Payable
$ 27,000.00
$ 27,000.00
Salaries & Wages Payable
$ -
$ 1,150.00 (2)
$ 1,150.00
Notes Payable
$ 51,300.00
$ 51,300.00
Interest Payable
$ -
$ 1,539.00 (3) [51300 x 12% x 3m/12months]
$ 1,539.00
Deferred revenue
$ -
$ 1,380.00 (7)
$ 1,380.00
Common Stock
$ 60,000.00
$ 60,000.00
Retained earnings
$ 18,500.00
$ 18,500.00
Sales revenue
$ 188,000.00
$ 1,380.00 (7)
$ 186,620.00
Interest revenue
$ -
$ 1,420.00 (4) [21300 x 8% x 10/12]
$ 1,420.00
Cost of Goods Sold
$ 84,600.00
$ 84,600.00
Salaries & Wages expenses
$ 17,100.00
$ 1,150.00 (2)
$ 18,250.00
Rent Expenses
$ 9,350.00
$ 850.00 (8) [Rent of Dec expired]
$ 10,200.00
Depreciation expense
$ -
$ 9,250.00 (1)
$ 9,250.00
Interest expense
$ -
$ 1,539.00 (3) [51300 x 12% x 3m/12months]
$ 1,539.00
Supplies expenses
$ 850.00
$ 640.00 (6) [1350 – 710]
$ 1,490.00
Insurance expenses
$ 4,400.00
$ 2,750.00 (5) [4400 x 15months/24months]
$ 1,650.00
Advertising Expenses
$ 2,700.00
$ 2,700.00
TOTALs
$ 372,550.00
$ 372,550.00
$ 18,837.00
$ 18,837.00
$ 385,909.00
$ 385,909.00
Income Statement
Revenues:
Sales revenue
$ 186,620.00
Interest revenue
$ 1,420.00
Total revenues
$ 188,040.00
Expenses:
Cost of Goods Sold
$ 84,600.00
Salaries & Wages expenses
$ 18,250.00
Rent Expenses
$ 10,200.00
Depreciation expense
$ 9,250.00
Interest expense
$ 1,539.00
Supplies expenses
$ 1,490.00
Insurance expenses
$ 1,650.00
Advertising Expenses
$ 2,700.00
Total Expenses
$ 129,679.00
Net Income
$ 58,361.00
---Existing Retained earnings balance = $ 18,500
---Updated balance, after adding Net Income = $ 18,500 + $ 58,361 = $ 76,861
POST CLOSING TRIAL BALANCE
Accounts title
Debit
Credit
Cash
$ 39,200.00
Accounts receivables
$ 48,000.00
Supplies
$ 710.00
Inventory
$ 68,000.00
Notes receivables
$ 21,300.00
Interest Receivables
$ 1,420.00
Prepaid Rent
$ 850.00
Prepaid Insurance
$ 2,750.00
Office Equipment
$ 74,000.00
Accumulated Depreciation Office Equipment
$ 37,000.00
Accounts Payable
$ 27,000.00
Salaries & Wages Payable
$ 1,150.00
Notes Payable
$ 51,300.00
Interest Payable
$ 1,539.00
Deferred revenue
$ 1,380.00
Common Stock
$ 60,000.00
Retained earnings [updated balance]
$ 76,861.00
Sales revenue
$ -
$ -
Interest revenue
$ -
$ -
Cost of Goods Sold
$ -
$ -
Salaries & Wages expenses
$ -
$ -
Rent Expenses
$ -
$ -
Depreciation expense
$ -
$ -
Interest expense
$ -
$ -
Supplies expenses
$ -
$ -
Insurance expenses
$ -
$ -
Advertising Expenses
$ -
$ -
TOTALs
$ 256,230.00
$ 256,230.00
Unadjusted Balances [as given]
Effects of Adjustments
ADJUSTED TRIAL BALANCE
Accounts title
Debit
Credit
Debit
Credit
Debit
Credit
Cash
$ 39,200.00
$ 39,200.00
Accounts receivables
$ 48,000.00
$ 48,000.00
Supplies
$ 1,350.00
$ 640.00 (6) [1350 – 710]
$ 710.00
Inventory
$ 68,000.00
$ 68,000.00
Notes receivables
$ 21,300.00
$ 21,300.00
Interest Receivables
$ -
$ 1,420.00 (4) [21300 x 8% x 10/12]
$ 1,420.00
Prepaid Rent
$ 1,700.00
$ 850.00 (8) [Rent of Dec expired]
$ 850.00
Prepaid Insurance
$ -
$ 2,750.00 (5) [4400 x 15months/24months]
$ 2,750.00
Office Equipment
$ 74,000.00
$ 74,000.00
Accumulated Depreciation Office Equipment
$ 27,750.00
$ 9,250.00 (1)
$ 37,000.00
Accounts Payable
$ 27,000.00
$ 27,000.00
Salaries & Wages Payable
$ -
$ 1,150.00 (2)
$ 1,150.00
Notes Payable
$ 51,300.00
$ 51,300.00
Interest Payable
$ -
$ 1,539.00 (3) [51300 x 12% x 3m/12months]
$ 1,539.00
Deferred revenue
$ -
$ 1,380.00 (7)
$ 1,380.00
Common Stock
$ 60,000.00
$ 60,000.00
Retained earnings
$ 18,500.00
$ 18,500.00
Sales revenue
$ 188,000.00
$ 1,380.00 (7)
$ 186,620.00
Interest revenue
$ -
$ 1,420.00 (4) [21300 x 8% x 10/12]
$ 1,420.00
Cost of Goods Sold
$ 84,600.00
$ 84,600.00
Salaries & Wages expenses
$ 17,100.00
$ 1,150.00 (2)
$ 18,250.00
Rent Expenses
$ 9,350.00
$ 850.00 (8) [Rent of Dec expired]
$ 10,200.00
Depreciation expense
$ -
$ 9,250.00 (1)
$ 9,250.00
Interest expense
$ -
$ 1,539.00 (3) [51300 x 12% x 3m/12months]
$ 1,539.00
Supplies expenses
$ 850.00
$ 640.00 (6) [1350 – 710]
$ 1,490.00
Insurance expenses
$ 4,400.00
$ 2,750.00 (5) [4400 x 15months/24months]
$ 1,650.00
Advertising Expenses
$ 2,700.00
$ 2,700.00
TOTALs
$ 372,550.00
$ 372,550.00
$ 18,837.00
$ 18,837.00
$ 385,909.00
$ 385,909.00