Reference no: EM132964142

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 33,500

Accounts receivable 41,600

Supplies 2,300

Inventory 61,600

Notes receivable 21,600

Interest receivable 0

Prepaid rent 1,700

Prepaid insurance 7,600

Office equipment 86,400

Accumulated depreciation 32,400

Accounts payable 32,600

Salaries payable 0

Notes payable 51,600

Interest payable 0

Deferred sales revenue 2,800

Common stock 71,200

Retained earnings 32,500

Dividends 5,600

Sales revenue 154,000

Interest revenue 0

Cost of goods sold 78,000

Salaries expense 19,700

Rent expense 11,800

Depreciation expense 0

Interest expense 0

Supplies expense 1,900

Insurance expense 0

Advertising expense 3,800

Totals 377,100 377,100

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

1. Depreciation on the office equipment for the year is $10,800.

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 $1,150.

3. On October 1, 2021, Pastina borrowed $51,600 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 $21,600 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 $7,600 for a one-year fire insurance policy. The entire $7,600 was debited to prepaid insurance.

6. $710 of supplies remained on hand at December 31, 2021.

7. A customer paid Pastina $2,800 in December for 1,150 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.

8. On December 1, 2021, $1,700 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $850 per month. The entire amount was debited to prepaid rent.

Required - Prepare an income statement and a statement of shareholders' equity for the year ended December 31, 2021, and a classified balance sheet as of December 31, 2021. Assume that no common stock was issued during the year and that $5,600 in cash dividends were paid to shareholders during the year.