Question

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 30,000 Accounts receivable 40,000 Supplies 1,500 Inventory 60,000 Notes receivable 20,000 Interest receivable 0 Prepaid rent 2,000 Prepaid insurance 6,000 Office equipment 80,000 Accumulated depreciation 30,000 Accounts payable 31,000 Salaries payable 0 Notes payable 50,000 Interest payable 0 Deferred sales revenue 2,000 Common stock 60,000 Retained earnings 28,500 Dividends 4,000 Sales revenue 146,000 Interest revenue 0 Cost of goods sold 70,000 Salaries expense 18,900 Rent expense 11,000 Depreciation expense 0 Interest expense 0 Supplies expense 1,100 Insurance expense 0 Advertising expense 3,000 Totals 347,500 347,500 Information necessary to prepare the year-end adjusting entries appears below. Depreciation on the office equipment for the year is $10,000. 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 $1,500. On October 1, 2021, 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. On March 1, 2021, the company lent a supplier $20,000, and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022. On April 1, 2021, the company paid an insurance company $6,000 for a one-year fire insurance policy. The entire $6,000 was debited to prepaid insurance. $800 of supplies remained on hand at December 31, 2021. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue. On December 1, 2021, $2,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,000 per month. The entire amount was debited to prepaid rent. I want the answers from question 1-8

Answer 1

Answer:

1.Dr Depreciation expense 10,000

Cr Accumulated depreciation-equipment 10,000

2.Dr Salaries expense 1,500

Cr Salaries payable 1,500

3.Dr Interest expense 1,500

Cr Interest payable 1,500

4.Dr Interest receivable 1,333

Cr Interest revenue 1,333

5.Dr Insurance expense 1,500

Cr Prepaid insurance 1,500

6.Dr Supplies expense 700

Cr Supplies 700

7.Dr Sales revenue 2,000

Cr Unearned revenue 2,000

8.Dr Rent expense 1,000

Cr Prepaid rent 1,000

Explanation:

Preparation of Journal entries

1. Based on the information given we were told that Depreciation on office equipment for the year is the amount of $10,000 which means that the Journal entry will be recorded as:

Dr Depreciation expense 10,000

Cr Accumulated depreciation-equipment 10,000

2. Based on the information given we were told that Salaries earned from 16 December to December 31, 2021, were the amount of $1,500 which means that the Journal entry will be:

Dr Salaries expense 1,500

Cr Salaries payable 1,500

3. Based on the information given we were told that On October 1, 2021, they borrowed the amount of $50,000 with an interest note that have to be paid yearly on September 30 at 12% which means that the transaction will be recorded as:

Dr Interest expense 1,500

(50,000*12%*3/12)

Cr Interest payable 1,500

4. Based on the information given we were told that on March 1, 2021, the company borrowed a supplier the amount of $20,000 with an interest of 8% to be paid on February 28, 2022 which means that the transaction will be recorded as:

Dr Interest receivable 1,333

(20,000*8%*10/12)

Cr Interest revenue 1,333

5. Based on the information given we were told that on April 1, 2021, the company paid an the amount of $6,000 to an insurance company for a one-year fire insurance policy which means that the Journal entry will be:

Dr Insurance expense 1,500

(6,000*3/12)

Cr Prepaid insurance 1,500

Since it is a one year fire insurance we subtracted the different between the month of April 1st and December 31st .

Hence,

12 months- 9 months= 3 months

=6,000 x 3/12

= 1,500

6. Based on the information given we were told that the amount of $800 of supplies remained on hand at December 31, 2021 which means that the transaction will be recorded as:

Dr Supplies expense 700

(1,500-800)

Cr Supplies 700

7. Based on the information given we were told that a customer paid the amount of $2,000 in December which means that the transaction will be recorded as;

Dr Sales revenue 2,000

Cr Unearned revenue 2,000

8. Based on the information given we were told that the payment that was made represented rent for December 2021 and January 2022 at the amount of $1,000 per month which means that the Journal entry will be recorded as:

Dr Rent expense 1,000

Cr Prepaid rent 1,000