Pastina Company manufactures and sells various types of pasta to grocery chains
ID: 2493182 • 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 $1,400.
On October 1, 2013, Pastina borrowed $55,000 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 $25,000 and a note was signed requiring principal and interest at 9% to be paid on February 28, 2014.
On April 1, 2013, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to insurance expense.
$900 of supplies remained on hand at December 31, 2013.
A customer paid Pastina $2,500 in December for 1,650 pounds of spaghetti to be manufactured and delivered in January 2014. Pastina credited sales revenue.
On December 1, 2013, $2,400 rent was paid to the owner of the building. The payment represented rent for December and January 2014, at $1,200 per month.
Prepare the necessary December 31, 2013, adjusting journal entries
Journal Entry Worksheet
Depreciation on the equipment for the year is $12,000.
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 $1,400.
On October 1, 2013, Pastina borrowed $55,000 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 $25,000 and a note was signed requiring principal and interest at 9% to be paid on February 28, 2014.
On April 1, 2013, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to insurance expense.
$900 of supplies remained on hand at December 31, 2013.
A customer paid Pastina $2,500 in December for 1,650 pounds of spaghetti to be manufactured and delivered in January 2014. Pastina credited sales revenue.
On December 1, 2013, $2,400 rent was paid to the owner of the building. The payment represented rent for December and January 2014, at $1,200 per month.
Account Title Debits Credits Cash 35,000 Accounts receivable 45,000 Supplies 1,400 Inventory 65,000 Note receivable 25,000 Interest receivable 0 Prepaid rent 2,400 Prepaid insurance 0 Equipment 96,000 Accumulated depreciation—equipment 36,000 Accounts payable 36,000 Wages payable 0 Note payable 55,000 Interest payable 0 Unearned revenue 0 Common stock 65,000 Retained earnings 43,500 Sales revenue 153,000 Interest revenue 0 Cost of goods sold 75,000 Wage expense 19,400 Rent expense 13,200 Depreciation expense 0 Interest expense 0 Supplies expense 1,000 Insurance expense 6,600 Advertising expense 3,500 Totals 388,500 388,500Explanation / Answer
Prepare the necessary December 31, 2013, adjusting journal entries:
entry debit credit 1 Depreciation expenseAccumulated depreciation 12,000
12,000 2 Wage expense
Wages payable 1,400
1,400 3 Interest expenses (55,000 * 12% * 3/12)
Interest payable 1,650
1,650 4 Interest receivable (25,000 *9% * 10/12)
Interest revenue 1,875
1,875 5 Prepaid insurance (6,600 * 15/24)
Insurance expense 4,125
4,125 6 Supplies expense (1,400-900)
Supplies 500
500 7 Sales revenue
Unearned revenue 2,500
2,500 8 Rent expense
Prepaid rent 1,200
1,200