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 $45,000 of cleaning services on account 2. Collected $39,000 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 $300 account receivable that was determined to be uncollectible. 2. Provided $62,000 of cleaning services on account. 3. Collected $61,000 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. Record the events for Year 1 and Year 2 in T-accounts. 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. Repeat Requirements b for the Year 2 accounting period. Complete this question by entering your answers in the tabs below. Required A Required B Required C Record the events for Year 1 and Year 2 in T-accounts. Cash Retained Earings Year 1 Beg. Bal. Bal. End. Bal. "ences Year 2 End. Bal. Accounts Receivable Service Revenue Year 1 Year 1 Bal Year 2 Bal. Year 2 End, Bal End. Bal References Allowance for Doubtful Accounts Uncollectible Accounts Expense Year 1 Year 1 Bal Bal Year 2 You 2 End, Bal. End, Bal Heged Required B (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. Repeat Requirements b for the Year 2 accounting period. Complete this question by entering your answers in the tabs below. Required A Required B Required C S 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. (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 Required a. Record the events for Year 1 and Year 2 in T-accounts. 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. Repeat Requirements b for the Year 2 accounting period. Complete this question by entering your answers in the tabs below. ces Required A Required B Required Repeat Requirements b for the Year 2 accounting period. (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) Not realizable value of accounts receivable at the end of Year 2
