The following is a list of financial statement items from the records of Marshall Corporation as at 31 December 2008. Prepaid Insurance $ 12,750 Prepaid Rent $ 18,000 Interest Receivable 0 Salaries Payable 0 Unearned fees $ 30,000 Interest Income $ 10,000

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The following is a list of financial statement items from the records of Marshall Corporation as at 31 December 2008. Prepaid Insurance $ 12,750 Prepaid Rent $ 18,000 Interest Receivable 0 Salaries Payable 0 Unearned fees $ 30,000 Interest Income $ 10,000

The following is a list of financial statement items from the records of Marshall Corporation as at 31 December 2008.

Prepaid Insurance	$ 12,750
Prepaid Rent	$ 18,000
Interest Receivable	0
Salaries Payable	0
Unearned fees	$ 30,000
Interest Income	$ 10,000

Additional information includes the following:

(a) The insurance policy indicates that on 31 December 2008, only 5 months remain on the 24 months policy that originally cost $18,000.

(b) Marshall has note receivable with $2,500 of interest due from a customer on 1 January 2009.

(c) The accounting records show that one-third of the fees paid in advance by a customer on 1 July 2008 has now been earned.

(d) The company purchased $18,000 of prepaid rent for 9 months on 1 August 2008.

(e) At year end, Marshal owed $7,000 worth of salaries to employee for work done in December 2008. The next payday is 5 January 2009.

You are required to show:

• Adjusting entries that must be made prior to the preparation of the financial statements for the year ended 31 December 2008.

• T-accounts for the relevant accounts and post the journal entries to each account.

• For the account used in the problem, calculate the balances that would be shown on Marshall financial statements for the year ended 31 December 2008. (show your workings)

accounting Adjusting-Entries

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Answer 1

Answer #1

Adjusting entries:
Ref.	Particulars			Debit	Credit
(a)	Insurance expense		(Note:1)	9000
	Prepaid insurance				9000
	(Insurance expired)
(b)	Interest receivable			2500
	Interest income				2500
	(Interest accrued)
(c )	Unearned fees		(30000/3)	10000
	Service revenue				10000
	(Fees earned during the year)
(d)	Rent expense	(18000/9)*5		10000
	Prepaid rent				10000
	(Rent expired for Aug to Dec-5 months)
(e )	Salaries expense			7000
	Salaries payable				7000
	(Salaries owed)

Note:1
Inurance expense originally paid for 24 months=$ 18000
Insurance expense per month=18000/24=$ 750
As on Dec 31,2008, only 5 months remain on the 24 months policy
Hence,insurance expense for 12 months expired in 2008=12*750=$ 9000

	Prepaid insurance			Prepaid rent
Ref.	Debit	Ref.	Credit	Ref.	Debit	Ref.	Credit
Bal.	12750	(a)	9000	Bal.	18000	(d)	10000
	12750		9000		18000		10000
Bal.	3750			Bal.	8000

	Interest receivable			Salaries payable
Ref.	Debit	Ref.	Credit	Ref.	Debit	Ref.	Credit
(b)	2500					(e )	7000

	Unearned fees			Interest income
Ref.	Debit	Ref.	Credit	Ref.	Debit	Ref.	Credit
(c )	10000	Bal.	30000			Bal.	10000
	10000		30000			(b)	2500
		Bal.	20000		0		12500
						Bal.	12500

	Service revenue			Insurance expense
Ref.	Debit	Ref.	Credit	Ref.	Debit	Ref.	Credit
		(c )	10000	(a)	9000

	Rent expense			Salaries expense
Ref.	Debit	Ref.	Credit	Ref.	Debit	Ref.	Credit
(d)	10000			(e )	7000

Balances:
		$
Prepaid insurance		3750
Prepaid rent		8000
Interest receivable		2500
Salaries payable		7000
Unearned fees		20000
Interest income		12500

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Answer 2

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The following is a list of financial statement items from the records of Marshall Corporation as at 31 December 2008. Prepaid Insurance $ 12,750 Prepaid Rent $ 18,000 Interest Receivable 0 Salaries Payable 0 Unearned fees $ 30,000 Interest Income $ 10,000

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