Aimes Corporation

Balance Sheet

December 31, 2016

Cash $ 30,000 Accounts Payable $ 13,750 Inventory 30,750 Interest Payable 2,500 Prepaid Insurance 5,600 Bonds Payable 50,000 Equipment 38,000 Common Stock 25,000 Retained Earnings 13,100 Totals $104,350 $104,350

During 2012, the following transactions occurred:

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. Markel also collected $28,800 sales taxes.

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.Reteemed 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 30 and December 31.

Adjustment Data:

Recorded the insurance expired from item 7.

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.

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

Instructions:

(You may want to set up T-accounts to determine ending balances.)

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.