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5. On April 1, 2021, the company paid an insurance company $10,000 for a one-year fire insurance policy. The entire $10,000 was debited to prepaid insurance.

5. On April 1, 2021, the company paid an insurance company $10,000 for a one-year fire insurance policy. The entire $10,000 was debited to prepaid insurance.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below. Account Title Debits Credits Cash 37,000 Accounts receivable 44,000 Supplies 3,500 Inventory 64,000 Notes receivable 24,000 Interest receivable Prepaid rent 3,000 Prepaid insurance 10,000 Office equipment 96,000 Accumulated depreciation Accounts payable Salaries payable Notes payable Interest payable Deferred sales revenue Common stock Retained earnings Dividends Sales revenue Interest revenue Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense Totals 36,000 35,000 0 54,000 0 4,000 88,000 38,500 8,000 166,000 0 90,000 20,900 13,000 0 0 3,100 0 5,000 421,500 421,500
Transcribed Image Text:Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below. Account Title Debits Credits Cash 37,000 Accounts receivable 44,000 Supplies 3,500 Inventory 64,000 Notes receivable 24,000 Interest receivable Prepaid rent 3,000 Prepaid insurance 10,000 Office equipment 96,000 Accumulated depreciation Accounts payable Salaries payable Notes payable Interest payable Deferred sales revenue Common stock Retained earnings Dividends Sales revenue Interest revenue Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense Totals 36,000 35,000 0 54,000 0 4,000 88,000 38,500 8,000 166,000 0 90,000 20,900 13,000 0 0 3,100 0 5,000 421,500 421,500
Information necessary to prepare the year-end adjusting entries appears below. 1. Depreciation on the office equipment for the year is $12,000. 2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,800. 3. On October 1, 2021, Pastina borrowed $54,000 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, 2021, the company lent a supplier $24,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022. 5. On April 1, 2021, the company paid an insurance company $10,000 for a one-year fire insurance policy. The entire $10,000 was debited to prepaid insurance. 6. $1,070 of supplies remained on hand at December 31, 2021. 7. A customer paid Pastina $4,000 in December for 1,750 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue. 8. On December 1, 2021, $3,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,500 per month. The entire amount was debited to prepaid rent.
Transcribed Image Text:Information necessary to prepare the year-end adjusting entries appears below. 1. Depreciation on the office equipment for the year is $12,000. 2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,800. 3. On October 1, 2021, Pastina borrowed $54,000 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, 2021, the company lent a supplier $24,000 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022. 5. On April 1, 2021, the company paid an insurance company $10,000 for a one-year fire insurance policy. The entire $10,000 was debited to prepaid insurance. 6. $1,070 of supplies remained on hand at December 31, 2021. 7. A customer paid Pastina $4,000 in December for 1,750 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue. 8. On December 1, 2021, $3,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,500 per month. The entire amount was debited to prepaid rent.
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