Aimes Corporation's balance sheet at December 31, 2016, is presented below.
AIMES CORPORATION Balance Sheet December 31, 2016
Cash $30,000 Accounts payable $13,750
Inventory 3,750 Interest payable 2,500
Prepaid Insurance 5,600 Bonds payable 50,000
Equipment 38,000 Common Stock 25,000
Retained Earnings 13,100
$104,350
$104,350
During 2017, the following transaction occurred. Aimes uses a perpetual inventory system.
1. Aimes paid $2,500 interest on the bonds on January 1, 2017.
2. Aimes purchased $241,100 of inventory on account.
3. Aimes sold for $480,000 cash inventory which cost $265,000. Aimes also collected $28,800 sales revenue.
4. Aimes paid $230,000 on accounts payable.
5. Aimes paid $2,500 interest on the bonds on July 1, 2017.
6. The prepaid insurance ($5,600) expired on July 31.
7. On August 1, Aimes paid $10,200 for insurance coverage from August 1, 2017, through July 31, 2018.
8. Aimes paid $17,000 sales taxes to the state.
9. Paid other operating expenses, $91,000.
10. Redeemed the bonds on December 31, 2017, by paying $48,000 plus $2,500 interest.
11. Issued $90,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 20 and December 31.
Adjustment Data:
1. Recorded the insurance expired from item 7.
2. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $3,000 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
1. Prepare journal entries for the transactions listed above and adjusting entries.
2. Prepare an adjusted trial balance at December 31, 2017.
3. Prepare all necessary closing entries.