Pastina Company sells various types of pasta to grocery chai

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.

   

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

Depreciation on the office equipment for the year is $9,500.

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 $1,200.

On October 1, 2018, Pastina borrowed $52,200 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.

On March 1, 2018, the company lent a supplier $22,200 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.

On April 1, 2018, the company paid an insurance company $4,600 for a two-year fire insurance policy. The entire $4,600 was debited to insurance expense.

$740 of supplies remained on hand at December 31, 2018.

A customer paid Pastina $1,440 in December for 1,200 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

On December 1, 2018, $1,800 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $900 per month.

For requirement 4, Assume that no common stock was issued during the year and that $3,600 in cash dividends were paid to shareholders during the year.

3. Prepare an adjusted trial balance.
4. Prepare the income statement, statement of shareholders\' equity and classified balance sheet for the year ended December 31, 2018.

Account Title	Debits		Credits
Cash	38,850
Accounts receivable	49,000
Supplies	1,400
Inventory	69,000
Note receivable	22,200
Interest receivable	0
Prepaid rent	1,800
Prepaid insurance	0
Office equipment	76,000
Accumulated depreciation—office equipment			28,500
Accounts payable			28,000
Salaries and wages payable			0
Note payable			52,200
Interest payable			0
Deferred revenue			0
Common stock			60,000
Retained earnings			19,000
Sales revenue			193,000
Interest revenue			0
Cost of goods sold	86,850
Salaries and wages expense	17,400
Rent expense	9,900
Depreciation expense	0
Interest expense	0
Supplies expense	900
Insurance expense	4,600
Advertising expense	2,800
Totals	380,700		380,700

3. Prepare an adjusted trial balance PASTINA COMPANY Adjusted Trial Balance December 31. 2018 Account Title Debits Credits 38,850 49,000 900 2,875 750 69,000 1,480 Cash Acco Prepaid rent Prepaid insurance Supplies Inventory Note receivable Interest receivable Office equipment Accumulated depreciation-office equipment Accounts payable Salaries and wages pavable 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 nsurance expense Advertising expense unts receivable 12,000 28,000 1,200 52,200 1,566 1,400 60,000 19,000 193,000 1,480 86,850 1,200 10,800 9,500 1,566 750 2,875 2,800 Totals $279,196$ 369,846

Solution

Adjusted Trial Balance December 31,2018 Accounts Title Debits Credits Cash 38850 Accounts receivable 49000 Supplies 740 Inventory 69000 Note receivable 22200 Interest Receivable 1480 Prepaid rent 900 Prepaid Insurance 2875 Office Equipment 76000 Accumulated Depreciation-Office Equipment 38000 Accounts payable 28000 Salaries & wages payable 1200 Notes payable 52200 Interest payable 1566 Deferred Revenue 1440 Common Stock 60000 Retained Earnings 19000 Sales Revenue 191560 Interest Revenue 1480 Cost of goods sold 86850 Salaries & wages expenses 18600 Rent Expenses 10800 Depreciation expense 9500 Interest expense 1566 Supplies expense 1560 Insurance expense 1725 Advertising expense 2800 Totals 394446 394446 Interest on Note payable for 3 months = 52200 x 12% x 3/12 = 1566 Interest on Note receivable for 10 months = 22200 x 8% x 10/12 = 1480 Insurance expense for 9 months = 4600/24 x 9 = 1725 Remaining amount will be recorded in Prepaid Insurance = 4600 - 1725 = 2875 PASTINA COMPANY Income Statement For the year Ended December 31, 2018 Sales Revenue 191560 Less: Cost of Goods Sold 86850 Gross Profit 104710 Operating Expenses: Salaries & wages expenses 18600 Rent Expenses 10800 Depreciation expense 9500 Insurance expense 1725 Supplies expense 1560 Advertising expense 2800 Total Operating Expenses 44985 Operating Profit 59725 Non Operating Income/expenses Interest expense 1566 Interest revenue 1480 86 Net Profit 59639 PASTINA COMPANY Statement of Shareholders\'Equity For the year Ended December 31, 2018 Common Stock Retained Earnings Total Shareholder\'s Equity Balance at January 1,2018 60000 19000 79000 Net Income 59639 59639 Less: Dividend -3600 -3600 Balance at December 31, 2018 60000 75039 135039 PASTINA COMPANY Balance Sheet At December 31, 2018 Assets Current Assets: Cash 35250 Accounts receivable 49000 Supplies 740 Inventory 69000 Note receivable 22200 Interest Receivable 1480 Prepaid rent 900 Prepaid Insurance 2875 Total Current Assets 181445 Fixed Assets: Office Equipment 76000 Accumulated Depreciation-Office Equipment -38000 Total Fixed Assets 38000 Total Assets 219445 Liabilities Current Liabilities: Accounts payable 28000 Salaries & wages payable 1200 Interest payable 1566 Deferred Revenue 1440 Total Current Liabilities 32206 Long Term Liabilities: Note payable 52200 Stockholders\' Equity Common Stock 60000 Retained Earnings 75039 Total Stockholders\' equity 135039 Total Long term liabilities & stockholders\' equity 187239 Total Liabilities & Stockholders equity 219445 Adjustment done to cash balance for dividend paid