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.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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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
| Account Title | Debits | Credits | ||
| Cash | 34,900 | |||
| 42,600 | ||||
| Supplies | 2,800 | |||
| Inventory | 62,600 | |||
| Notes receivable | 22,600 | |||
| Interest receivable | 0 | |||
| Prepaid rent | 2,300 | |||
| Prepaid insurance | 8,600 | |||
| Office equipment | 90,400 | |||
| 33,900 | ||||
| Accounts payable | 33,600 | |||
| Salaries payable | 0 | |||
| Notes payable | 52,600 | |||
| Interest payable | 0 | |||
| Deferred sales revenue | 3,300 | |||
| Common stock | 78,200 | |||
| 35,000 | ||||
| Dividends | 6,600 | |||
| Sales revenue | 159,000 | |||
| Interest revenue | 0 | |||
| Cost of goods sold | 83,000 | |||
| Salaries expense | 20,200 | |||
| Rent expense | 12,300 | |||
| Depreciation expense | 0 | |||
| Interest expense | 0 | |||
| Supplies expense | 2,400 | |||
| Insurance expense | 0 | |||
| Advertising expense | 4,300 | |||
| Totals | 395,600 | 395,600 | ||
Information necessary to prepare the year-end
- Depreciation on the office equipment for the year is $11,300.
- 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 $1,400.
- On October 1, 2021, Pastina borrowed $52,600 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.
- On March 1, 2021, the company lent a supplier $22,600 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 $8,600 for a one-year fire insurance policy. The entire $8,600 was debited to prepaid insurance.
- $860 of supplies remained on hand at December 31, 2021.
- A customer paid Pastina $3,300 in December for 1,400 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
- On December 1, 2021, $2,300 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,150 per month. The entire amount was debited to prepaid rent.
rev: 09_14_2019_QC_CS-180268, 10_11_2019_QC_CS-184133, 09_22_2020_QC_CS-229266
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