Exercise 5-8A (Static) Determining account balances: Allowance method of accounting for uncollectible accounts LO 5-1 During the first year of operation, Year 1, Direct Service Co. recognized $290,000 of service revenue on account. At the end of Year 1, the accounts receivable balance was $46,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on account. Required a. What amount of cash did Direct Service collect from accounts receivable during Year 1? b. Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 1? c. What is the net realizable value of receivables at the end of Year 1? d. Show the effects of the given transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA). Investing activity (IA), or financing activity (FA). For events that have no effect, leave the cell blank. Req A to C Req D What amount of cash did Direct Service collect from accounts receivable during Year 1? Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for Year 1? What is the net realizable value of receivables at the end of Year 17 a. Collections of accounts receivable b. Uncollectible accounts expense. c. Net realizable value Show less A Req A to C Req D Show the effects of the given transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one sho Indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). For events that have no effect, leave the cell blank. (N any decreases to account balances and cash outflows with a minus sign.) DIRECT SERVICE CO. Horizontal Statements Model Assets. Income Statement Equity Statement of Cash Event Liabilities + Net Cash NRV Accounts Receivable Retained Earnings Revenue Flow Expense Income 1. Sales 2. Cash Collected 3. Uncollectible Accounts Totals 0+ 0 = 0+