Pastina Company manufactures and sells various types of pasta to grocery chains
ID: 2490908 • Letter: P
Question
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.
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 $1,500.
On October 1, 2013, Pastina borrowed $42,000 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.
On March 1, 2013, the company lent a supplier $12,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2014.
On April 1, 2013, the company paid an insurance company $5,040 for a two-year fire insurance policy. The entire $5,040 was debited to insurance expense.
$800 of supplies remained on hand at December 31, 2013.
A customer paid Pastina $1,200 in December for 1,260 pounds of spaghetti to be manufactured and delivered in January 2014. Pastina credited sales revenue.
On December 1, 2013, $2,000 rent was paid to the owner of the building. The payment represented rent for December and January 2014, at $1,000 per month.
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.)
Account Title Debits Credits Cash 22,000 Accounts receivable 32,000 Supplies 1,500 Inventory 52,000 Note receivable 12,000 Interest receivable 0 Prepaid rent 2,000 Prepaid insurance 0 Equipment 80,000 Accumulated depreciation—equipment 30,000 Accounts payable 23,000 Wages payable 0 Note payable 42,000 Interest payable 0 Unearned revenue 0 Common stock 52,000 Retained earnings 13,940 Sales revenue 140,000 Interest revenue 0 Cost of goods sold 62,000 Wage expense 18,100 Rent expense 11,000 Depreciation expense 0 Interest expense 0 Supplies expense 1,100 Insurance expense 5,040 Advertising expense 2,200 Totals 300,940 300,940Explanation / Answer
Depreciation A/c-Dr
To Accumulated Depreciation
(Being Depreciation Charged on Equipment)
10,000
Wages A/c-Dr
To Wages payable A/c
(Being WagesPayable for 16th december to 31st december recorded)
1,500
Interest A/c-Dr
To Interest payable
(Being Interest payable for 3months i.e. october to december recorded)
1,260
1,260
Interest receivable-Dr
To Interest
(Being Interest Receivable for 10months i.e. march to december recorded)
800
Prepaid Insurance A/c-Dr
To Insurance Expense
(Being Prepaid Insurance for 15months recorded)
3,150
Supplies A/c-Dr
To Cost Of Goods Sold
(Being Closing Supplies Entered)
800
Sales Revenue A/c-Dr
To Unearned revenue'
(Being Recification Entry Passed for wrong recording of advance)
1,200
Rent A/c- Dr
To Prepaid Rent
(Being Prepaid Rent for January Booked)
1,000
Calculation of Interest Payable On Loan Taken From Bank
Total Interest=42,000*12%=5,040
Current Year Interest Payable i.e. from October to December=5,040/12*3months=1,260
Caluclation of Interest Receivable on Money Lent to a Supplier
Total Interest=12,000*8%=960
Current Year Interest Receivable for 10months from March to December=960/12*10months=800
Calculation of Prepaid Insurance
Total Insurance for 24mpnths=5,040
Current Year time Period=9months (Aprl to December)
Advcance time Period=Total Time Period-Current Time Period
=24-9=15Months
Prepaid Insurance=5,040/24*15Months=3,150
Journal Entries Particulars Debit CreditDepreciation A/c-Dr
To Accumulated Depreciation
(Being Depreciation Charged on Equipment)
10,00010,000
Wages A/c-Dr
To Wages payable A/c
(Being WagesPayable for 16th december to 31st december recorded)
1,5001,500
Interest A/c-Dr
To Interest payable
(Being Interest payable for 3months i.e. october to december recorded)
1,260
1,260
Interest receivable-Dr
To Interest
(Being Interest Receivable for 10months i.e. march to december recorded)
800800
Prepaid Insurance A/c-Dr
To Insurance Expense
(Being Prepaid Insurance for 15months recorded)
3,1503,150
Supplies A/c-Dr
To Cost Of Goods Sold
(Being Closing Supplies Entered)
800800
Sales Revenue A/c-Dr
To Unearned revenue'
(Being Recification Entry Passed for wrong recording of advance)
1,2001,200
Rent A/c- Dr
To Prepaid Rent
(Being Prepaid Rent for January Booked)
1,0001,000