Exercise 7-4A 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 $29,860 of cleaning services on account. 2. Collected $23,888 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 $224 account receivable that was determined to be uncollectible. 2. Provided $34,847 of cleaning services on account. 3. Collected $30,840 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. b. Determine the following amounts: 1. (1) Net income for Year 1. 2. (2) Net cash flow from operating activities for Year 1. 3. (3) Balance of accounts receivable at the end of Year 1. 4. (4) Net realizable value of accounts receivable at the end of Year 1. c. Determine the following amounts: 1. (1) Net income for Year 2. 2. (2) Net cash flow from operating activities for Year 2. 3. (3) Balance of accounts receivable at the end of Year 2. 4. (4) Net realizable value of accounts receivable at the end of Year 2. Complete this question by entering your answers in the tabs below. 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 in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.) 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 in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.) ROSIE DRY CLEANING Accounting Equation for the Year 1 Balance Sheet Assets Equity Accounts Allowance Retained Receivable Earnings Event Accounts Titles for Retained Earnings Cash + + 1. + 2. 3. + + Bal. Req A1 Req A2 > 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 in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.) ROSIE DRY CLEANING Accounting Equation for the Year 2 Balance Sheet Assets Equity Accounts Titles for Retained Earnings Accounts Retained Allowance Receivable Earnings Event Cash Bal. 1. 2. + + + + + 3. Bal. + 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 Req 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