For the below transactions:

1. Prepare the journal entries for each transaction shown. For transactions such as depreciation, amortization of prepaid expenses, or recurring monthly transactions, they can be done once at the end of the year instead of monthly (it is up to your preference).

2. Prepare a trial balance as of December 31, 2021. The trial balance should show unadjusted balances, adjusting journal entries, adjusted balances, the closing journal entry, and the post-closing trial balance. The trial balance should be in columnar format, broken out into debit and credit columns for each category.

3. Prepare a full set of financial statements for Aarons Auto Parts using the trial balance prepared above this means a Balance Sheet as of December 31, 2021, as well as an Income Statement, Statement of Stockholders Equity and Statement of Cash Flows for the year ended December 31, 2021.

Aarons Auto Parts (AAP) was established to distribute auto parts to retailers and auto shops. The company began business on November 1, 2020. The following transactions took place during the year ended December 31, 2021:

Beginning Account Balances as of January 1, 2021 are as follows:

Cash - $65,000

Accounts Receivable - $10,000

Inventory - $7,000

Accounts Payable - $10,500

Retained Earnings - $71,500

(1) January 2

Investors contributed $150,000 cash to help in launching AAP in exchange for 50,000 shares of stock.

(2) January 2

Albert hired two of his friends, Eric and Josh, to work for him and to help get started. He will pay his two employees $3,000 each on the first day of the quarter for the work performed in the prior quarter. The first payment will be made on April 1, 2021 for the work performed from January March 2021.

(3) January 31

Aaron rented a building for $5,500 per month on a seven year rental contract. Rent is due on the 1st of every month beginning on February 1.

(4) January 31

AAP obtained an $80,000 cash loan from Capital Bank. The note has a 9% annual interest rate and requires monthly interest only payments (0.75% per month) on the first day of every month beginning on March 1, 2021. The loan is due to be paid in full in two years.

(5) February 28

AAP purchased shelving, racks, a forklift, and other equipment on account for $19,500. This equipment is expected to be usable for 7 years.

(6) March 28

AAP purchased oil filters, air filters, brake pads, etc. totaling $375,000 from various manufacturers on account.

(7) June 1

Sold 10,000 brake pads to Bobs Brakes on account. These brake pads were sold for $36.50 each, and they cost $22.75 each.

(8) June 15

Sent a check totaling $35,000 to a vendor as partial payment for the inventory purchased in transaction (6).

(9) July 7

Sold 350 alternators to Joes Garage for $145 each on account. AAP had previously purchased these items for $100 each. AAP also sold 1,750 oil filters to Joes Garage on account for $6 each. They cost AAP $4.

(10) August 1

AAP purchased a general insurance plan that will cover the company for two years from August 1, 2021 through July 30, 2023. The policy cost $35,000 for the two years. AAP paid for the policy in cash.

(11) September 8

Collected the full amount outstanding from Bobs Brakes on the sale made in transaction (7).

(12) October 3

Paid the remainder of the amount due for the inventory purchased in transaction (6), and paid for the equipment purchased in transaction (5) .

(13) October 15

Paid a $5,000 dividend to shareholders.

(14) October 19

AAP signed a contract with an auto parts retailer to provide 5,000 oil filters on the first of every month for 6 months beginning on November 1. AAP collected the total sales price for all six months worth of oil filters when the contract was signed, for a total of $210,000. The filters cost $5.75 each.

(15) November 15

Received $165,250 worth of parts inventory purchased from Cal Parts. An invoice came with the parts dated November 15. The invoice is payable on January 15, 2022.

(16) December 15

Received a utility bill for $375, which will be paid the first of the following month.

(17) December 31

Aaron is unsure that he will collect the amount due from Joes Garage, since Joes has not paid on its account since its purchase in July. Aaron estimates that 50% of the balance due from Joes Garage is potentially uncollectible. In addition, the 10,000 due from the previous year is also estimated to be uncollectible.

(18) December 31

AAPs income is subject to a tax rate of 35%.