9 Required information Exercise 7-7A Effect of recognizing uncollectible accounts on the financial statements: percent of receivables allowance method LO 7-2 The following information applies to the questions displayed below) Leach Inc. experienced the following events for the first two years of its operations: Year 1: 1. Issued $12,000 of common stock for cash. 2. Provided $80,200 of services on account. 3. Provided $38,000 of services and received cash. 4. Collected $71,000 cash from accounts receivable. 5. Paid $40,000 of salaries expense for the year. 6. Adjusted the accounting records to re flect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible. 7. Closed the revenue account. 8. Closed the expense account. Year 2: 1. Wrote off an uncollectible account for $660 2. Provided $90,000 of services on account. 3. Provided $34,000 of services and collected cash. 4. Collected $83,000 cash from accounts receivable. 5. Paid $67000 of salaries expense for the year. 6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible. Income Statement Part 2 of 4 For the Year Ended December 31, Year 1 Operating expenses points Total operating expenses eBook Print LEACH INC Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 References Total stockholders' equity LEACH INC Balance Sheet As of December 31, Year 1 Assets Total assets Liabilities Stockholders' equity 0 Total stockholders' equity Total liabilities and stockholders' equity 0 0 LEACH INC Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flow from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities 0 Net change in cash 0 Ending cash balance 0 c. What is the net realizable value of the accounts receivable at December 31, Year 1? Net realizable value Journal entry worksheet Wrote off an uncollectible account for $660. Note: Enter debits before credits. Transaction General Journal Debit Credit Clear entry View general journal Record entry Journal entry worksheet Provided $90,000 of services on account. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal Provided $34,000 of services and collected cash. Note: Enter debits before credits. Transaction General Journal Debit Credit 3 Record entry Clear entry View general journal Journal entry worksheet Collected $83,000 cash from accounts receivable. Note: Enter debits before credits. Transaction General Journal Debit Credit 4 Record entry Clear entry View general journal Journal entry worksheet Paid $67,000 of salaries expense for the year. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible. Note: Enter debits before credits. Transaction General Journal Debit Credit Clear entry View general journal Record entry Cash Common Stock Beg. Bal. +Beg. Bal. End. Bal. End. Bal. Accounts Receivable Service Revenue Beg. Bal. Beg. Bal. End. Bal. End. Bal Allowance for Doubtful Accounts Retained Earnings Beg. Bal Beg. Bal End. Bal End. Bal Salaries Expense Uncollectible Accounts Expense Beg. Bal Beg. Bal End. Bal. End. Ba LEACH INC. Income Statement For the Year Ended December 31, Year 2 of 4 Operating expenses 31:18 Total operating expenses ok ces LEACH INC. Statement of Changes in Stockholders Equity For the Year Ended December 31, Year 2 Total stockholders' equity LEACH INC. Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity LEACH INC. Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Ending cash balance