MARKEL CORPORATION Balance Sheet December 31 2011 Cash $ 30000 Accoun

MARKEL CORPORATION

Balance Sheet

December 31 2011

Cash $ 30000 Accounts payable $ 13750

Inventory 30750 Interest payable 2500

Prepaid insurance 5600 Bonds payable 50000

Equipment 38000 Common stock 25000

$104350

Retained earnings $ 13100

$104350

During 2012 the following transactions occurred.

1. Markel paid $2500 interest on the bonds on January 1 2012.

2. Markel purchased $241100 of inventory on account.

3. Markel sold for $480000 cash inventory which cost $265000. Markel also collected

$28800 sales taxes.

4. Markel paid $230000 on accounts payable.

5. Markel paid $2500 interest on the bonds on July 1 2012.

6. The prepaid insurance ($5600) expired on July 31.

7. On August 1 Markel paid $10200 for insurance coverage from August 1 2012

through July 31 2013.

8. Markel paid $17000 sales taxes to the state.

9. Paid other operating expenses $91000.

10. Retired the bonds on December 31 2012 by paying $48000 plus $2500 interest.

11. Issued $90000 of 8% bonds on December 31 2012 at 103. The bonds pay interest

every June 30 and December 31.

Adjustment data:

1. Recorded the insurance expired from item 7.

2. The equipment was acquired on December 31 2011 and will be depreciated on a

straight-line basis over 5 years with a $3000 salvage value.

3. The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

Instructions:

a) Prepare the 3rd Adjusted Entry (Hint: Income Statement before Income Tax is $104150) and Trial Balance

b) Prepare all necessary closing entries