Following is a partial list of financial statement items from the records of Marshall’s Company at December 31, 2010, before any adjustments have been made:

Prepaid insurance ........$ 12,750

Prepaid rent ........... 18,000

Interest receivable .......0

Salaries payable ..........0

Unearned revenue ....... 30,000

Interest revenue ........ 10,000

Additional information includes the following:

• The insurance policy indicates that on December 31, 2010, only five months remain on the 24-month policy that originally cost $18,000 (purchased on June 1, 2009).

• Marshall’s has a note receivable with $2,500 of interest due from a customer on January 1, 2011. This amount has not been recorded.

• The accounting records show that one-third of the revenue paid in advance by a customer on July 1, 2010, has now been earned.

• The company paid $18,000 for rent for nine months starting on August 1, 2010, recording the total amount as prepaid rent.

• At year end, Marshall’s owed $7,000 worth of salaries to employees for work done in December 2010. The next payday is January 5, 2011. The salary expense has not been recorded.

Requirements

1. Use the accounting equation to show the adjustments that must be made prior to the preparation of the financial statements for the year ended December 31, 2010.

2. For the accounts shown, calculate the account balances that would be shown on Marshall’s financial statements for the year ended December 31, 2010; balance sheet at December 31, 2010.