Exercise 7-2A (Algo) Accounting for uncollectible accounts: allowance method LO 7-1

Holmes Cleaning Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations:

Events Affecting Year 1:

Provided $210,000 of cleaning services on account.

Collected $157,500 cash from accounts receivable.

Paid salaries of $32,000 for the year.

Adjusted the accounts to reflect managements expectations that uncollectible accounts expense would be $1,600. The expense was determined using the percent of revenue method.

Required:

Organize the transaction data in accounts under an accounting equation.

Prepare an income statement, a balance sheet, and a statement of cash flows for Year 1.