Problem 2Adjusting and closing entries (24 points).

The following trial balance was taken from the books of Marvelous Corporation on December 31, 2020.

Account	Debit	Credit
Cash	$ 12,000
Accounts Receivable	40,000
Note Receivable	7,000
Allowance for Doubtful Accounts		$ 1,800
Merchandise Inventory	44,000
Prepaid Insurance	4,800
Prepaid Rent	10,000
Furniture and Equipment	125,000
Accumulated Depreciation--F. & E.		15,000
Accounts Payable		10,800
Common Stock		44,000
Retained Earnings		55,000
Sales		280,000
Cost of Goods Sold	111,000
Salaries Expense	50,000
Rent Expense	2,800
Totals	$406,600	$406,600

At year end, the following items have not yet been recorded.

1. Insurance expired during the year, $2,000.
2. Estimated bad debts, 1% of gross sales.
3. Depreciation on furniture and equipment, 10% per year.
4. Interest at 6% is receivable on the note for one full year.
5. Rent was paid in advance for five months (from October 2020 through March 2021).
6. Accrued salaries at December 31, $5,800.

Instructions

1. Prepare the necessary adjusting entries.
2. Prepare the necessary closing entries.