Applied Business Systems has a small number of sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During Year 1, Applied Business Systems earned $46,000 of cash revenue and $9,000 of revenue on account. Cash operating expenses were $32,100. After numerous attempts to collect a $325 account receivable from J.C. Mims, the account was determined to be uncollectible in Year 2.

Required

a. Show the effects of

(1) Cash revenue,

(2) Revenue on account,

(3) Cash expenses, 

(4) Write-off of the uncollectible account on the financial statements using a horizontal statements model like the following one. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.

b. What amount of net income did Patel Service Co. report on the Year 1 income statement?

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Balance Sheet Statement Income Statement of Cash Assets = Llab. + Stk. Equlty Flows Cash + Accts. Rec. Rev. Exp. Net Inc. %3D