Exercise 7-4A (Algo) Effect of recognizing uncollectible accounts expense on financial statements: Percent of revenue allowance method LO 7-1 Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its first two years of operation: Events Affecting Year 1 1. Provided $33,710 of cleaning services on account. 2. Collected $26,968 cash from accounts receivable. 3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account. Events Affecting Year 2 1. Wrote off a $253 account receivable that was determined to be uncollectible. 2. Provided $39,340 of cleaning services on account. 3. Collected $34,816 cash from accounts receivable. 4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account. Required a. Organize the transaction data in accounts under an accounting equation for each year. b. Determine the following amounts: (1) Net income for Year 1. (2) Net cash flow from operating activities for Year 1. (3) Balance of accounts receivable at the end of Year 1. (4) Net realizable value of accounts receivable at the end of Year 1. c. Determine the following amounts: (1) Net income for Year 2. (2) Net cash flow from operating activities for Year 2. (3) Balance of accounts receivable at the end of Year 2. (4) Net realizable value of accounts receivable at the end of Year 2. Req A1 Req A2 Req B Reqc Organize the transaction data in accounts under an accounting equation for Year 1. (Enter any decreases to account balances with a minus sign. Not all cells require input.) ROSIE DRY CLEANING Accounting Equation for Year 1 Balance Sheet Liabilities Equity Event Assets NRV + Accounts Receivable Account Titles for Retained Earnings + Cash Retained Earnings 1. + + + 2. + = + 3. + = + Bal. 0 + 0 = 0 + 0 Req A1 Req A2 Req B Reqc Organize the transaction data in accounts under an accounting equation for Year 2. (Enter any decreases to account balances with a minus sign. Not all cells require input.) ROSIE DRY CLEANING Accounting Equation for Year 2 Balance Sheet Event Assets Liabilities Account Titles for Retained Earnings + Equity Retained Earnings Cash NRV Accounts Receivable + Bal. + + 1. + + 2. + + 3. + = + 4. + + Bal. 0 + 0 = 0 + 0 Req A1 Req A2 Req B. Reqc Determine the following amounts for the Year 1 accounting period. (Round your answers to nearest whole dollar amount.) Net income Net cash flow from operating activities Balance of accounts receivable Net realizable value of accounts receivable Req A1 Req A2 Reg B Reqc Determine the following amounts for the Year 2 accounting period. (Round your answers to nearest whole dollar amount.) Net income Net cash flow from operating activities Balance of accounts receivable Net realizable value of accounts receivable