Comprehensive Accounting Cycle Review 10 (Part Level Submission)

Aimes Corporations balance sheet at December 31, 2016, is presented below.

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
		$104,350				$104,350

During 2017, the following transactions 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 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.		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 30 and December 31.

Adjustment data:

12.		Recorded the insurance expired from item 7.
13.		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.
14.		The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

No. Account Titles and Explanation Debit Credit 1. Interest Payable 2500 Cash 2500 2. Inventory 241100 Accounts Payable 241100 3. Cash 508800 Sales Revenue 480000 Sales Taxes Payable (To record sales revenue.) Cost of Goods Sold 28800 265000 Inventory 265000 (To record cost of goods sold.) 4. Accounts Payable 230000 230000 Cash 5. Interest Expense 2500 Cash 2500 6. Insurance Expense 5600 Prepaid Insurance 5600 7. Prepaid Insurance 10200 Cash 10200 8. Sales Taxes Payable 17000 Cash 17000 91000 9. Other Operating Expenses Cash 91000 10. Interest Expense 2500 Cash 2500 (To record interest expense.) 50000 Bonds Payable Gain on Bond Redemption 2000 48000 Cash (To record retirement of bonds.) 11. Cash 92700 Bonds Payable 90000 Premium on Bonds Payable 2700 12. Insurance Expense 4250 Prepaid Insurance 4250 13. Depreciation Expense 7000 Accumulated Depreciation-Equipment 7000 14. Income Tax Expense 31245 Income Taxes Payable 31245 AIMES CORPORATION Trial Balance December 31, 2017 Debit Credit Cash 227,800 Inventory 6,850 Prepaid Insurance Equipment Depreciation Expense 5,950 38,000 7,000 Cost of Goods Sold 265,000 91,000 Other Operating Expenses Interest Expense Insurance Expense 5000 9850 31245 Income Tax Expense Accounts Payable Bonds Payable Premium on Bonds Payable Accumulated Depreciation-Equipment Sales Taxes Payable 24850 90000 2700 7000 11800 Common Stock 25000 Retained Earnings 13100 Sales Revenue 480000 Gain on Bond Redemption 2000 Income Taxes Payable 31245 Totals 687695 687695 AIMES CORPORATION Income Statement For the Year Ending December 31, 2017 v Sales Revenues 480000 Cost of Goods Sold 265000 Gross Profit 215000 Operating Expenses Other Operating Expenses 91000 Insurance Expense 9850 Depreciation Expense Total Operating Expenses Income From Operations Other Revenues and Expenses 7000 107850 107150 Gain on Bond Redemption 2000 5000 Interest Expense Income Before Income Taxes v 104150 Income Tax Expense 31245 72905 Net Income (Loss) AIMES CORPORATION Retained Earnings Statement For the Year Ending December 31, 2017 Retained Earnings, 1/1/17 13100 Add Net Income (Loss) 72905 86005 Retained Earnings, 12/31/17 v Liabilities and Stockholders' Equity