Aimes Corporations balance sheet at December 31, 2021, is presented below. During 2022, the following transactions occurred.
Question:
Aimes Corporation’s balance sheet at December 31, 2021, is presented below.
During 2022, the following transactions occurred. Aimes uses a perpetual inventory system.
1. Aimes paid $2,500 interest on the bonds on January 1, 2022.
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, 2022.
6. The prepaid insurance ($5,600) expired on July 31.
7. On August 1, Aimes paid $10,200 for insurance coverage from August 1, 2022, through July 31, 2023.
8. Aimes paid $17,000 sales taxes to the state.
9. Paid other operating expenses, $91,000.
10. Redeemed the bonds on December 31, 2022, by paying $48,000 plus $2,500 interest.
11. Issued $90,000 of 8% bonds on December 31, 2022, at 103. The bonds pay interest every June 30 and December 31.
Adjustment data:
1. Recorded the insurance expired from item 7.
2. The equipment was acquired on December 31, 2021, 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%.
Instructions
a. Prepare journal entries for the transactions listed above and adjusting entries.
b. Prepare an adjusted trial balance at December 31, 2022.
c. Prepare an income statement and a retained earnings statement for the year ending December 31, 2022, and a classified balance sheet as of December 31, 2022.
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119493631
9th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso