FINANCE

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.

 

Account Title        Debits        Credits

Cash                  30,000

Accounts receivable 40,000

Supplies                  1,500

Inventory                     60,000

Note receivable      20,000

Interest receivable      0

Prepaid rent            2,000

Prepaid insurance      0

Equipment             80,000

Accumulated depreciation—equipment      30,000

Accounts payable                         31,000

Wages payable                         0

Note payable                          50,000

Interest payable                        0

Unearned revenue                       0

Common stock                     60,000

Retained earnings                24,500

Sales revenue                     148,000

Interest revenue                      0

Cost of goods sold    70,000

Wage expense       18,900

Rent expense          11,000

Depreciation expense    0

Interest expense            0

Supplies expense      1,100

Insurance expense     6,000

Advertising expense    3,000

 

Totals                   343,500           343,500

 

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

 

1. Depreciation on the equipment for the year is $10,000.

 

2. 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.

 

3. On October 1, 2013, Pastina borrowed $50,000 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.

 

4. On March 1, 2013, the company lent a supplier $20,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2014.

 

5. On April 1, 2013, the company paid an insurance company $6,000 for a two-year fire insurance policy. The entire $6,000 was debited to insurance expense.

 

6. $800 of supplies remained on hand at December 31, 2013.

 

7. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be manufactured and delivered in January 2014. Pastina credited sales revenue.

 

8. 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.

 

Required:

 

1. Prepare adjusting entries (P2-3)

 

(P2-4)

1.  Post the opening balances, transactions and adjusting entries into the appropriate t-accounts.

 

2. Prepare adjusted trial balance

 

3. Prepare financial statements (income statement, statement of stockholder’s equity, balance sheet)

 

4. Prepare closing entries

 

5. Prepare post-closing trial balance

 

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