A large marketing firm, adjusts its accounts at the end of each month. The following information is available: 1. A bank loan had been obtained on December 1. Accrued interest on the loan on December 31 amounts to $1,200. No interest expense has yet been recorded. 2. Depreciation of the firm's office building is based on an estimated life of 25 years. The building was purchased in 2001 for $330,000. 3. Accrued, but unbilled, revenue during December amounts to $64,000. 4. On March 1, the firm paid $1,800 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance. 5. The firm received $14,000 from the King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. On December 31, $3,500 had actually been earned by the firm. 6. The company's policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $2400.

Based on the provided information, here are the detailed answers to the questions regarding the large marketing firm's adjustments at the end of December:

1. Accrued Interest on the Bank Loan: The firm obtained a bank loan on December 1, and by December 31, the accrued interest on the loan is $1,200. Since no interest expense has been recorded yet, the firm needs to recognize this interest expense. The entry for this adjustment would be to debit Interest Expense for $1,200 and credit Accrued Interest Payable for the same amount. This ensures that the financial statements reflect the interest expense for the period and the obligation to pay the interest in the future.12

2. Depreciation of the Office Building: The office building was purchased in 2001 for $330,000, and its depreciation is calculated over an estimated life of 25 years. To find the annual depreciation, we can use the straight-line depreciation method, which is the simplest form of depreciation. The formula for straight-line depreciation is: $ \text{Annual Depreciation} = \frac{\text{Cost of the Asset} - \text{Salvage Value}}{\text{Estimated Useful Life}} $ Assuming there is no salvage value, the annual depreciation would be: $ \text{Annual Depreciation} = \frac{330,000}{25} = 13,200 $ Since the building was purchased in 2001, by the end of December, the firm would have owned the building for 23 years (from 2001 to 2024). The total accumulated depreciation would be: $ \text{Total Accumulated Depreciation} = 13,200 \times 23 = 303,600 $ However, this information is not directly provided, and we would need to know the current book value of the building to determine the depreciation expense for the year 2024.3

3. Accrued, but Unbilled, Revenue: The firm has accrued $64,000 in revenue during December that has not yet been billed. This means that the revenue has been earned but not yet invoiced to the clients. The adjustment entry for this would be to debit Accounts Receivable for $64,000 and credit Service Revenue or Unearned Revenue (depending on the firm's accounting policy) for the same amount. This ensures that the revenue is recognized in the period it was earned.6

4. Insurance Policy Prepayment: On March 1, the firm paid $1,800 to renew a 12-month insurance policy, and the entire amount was recorded as Prepaid Insurance. Since the policy covers a 12-month period, the insurance expense should be spread evenly over the year. The monthly insurance expense would be: $ \text{Monthly Insurance Expense} = \frac{1,800}{12} = 150 $ For the period from March 1 to December 31, which is 10 months, the total insurance expense to be recognized would be: $ \text{Total Insurance Expense for 10 months} = 150 \times 10 = 1,500 $ The adjustment entry would be to debit Insurance Expense for $1,500 and credit Prepaid Insurance for the same amount. This recognizes the portion of the prepaid insurance that has been used up during the year.5

5. Revenue Earned from Advance Payment: The firm received $14,000 from the King Biscuit Company in advance for a six-month marketing campaign. Initially, this was recorded as Unearned Revenue. By December 31, $3,500 of this amount had been earned. The adjustment entry would be to debit Unearned Revenue for $3,500 and credit Service Revenue for the same amount. This recognizes the portion of the advance payment that has been earned as revenue.9

6. Accrued Salaries: Since December 31 fell on a Wednesday, and the firm pays its employees every Friday, there is an accrued liability for salaries amounting to $2,400. This means that the employees have worked for the firm during the last three days of December, but they have not yet been paid. The adjustment entry for this would be to debit Salaries Expense for $2,400 and credit Salaries Payable for the same amount. This recognizes the expense for the services provided by the employees and the liability to pay them in the future.6

These adjustments ensure that the firm's financial statements accurately reflect the financial position and performance for the month and year-end.