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Exercise 7-4B Effect of recognizing uncollectible accounts expense on financial statements: percent of revenue allowance method pciable Auto Service was started on January 1, Year
Exercise 7-4B
Effect of recognizing uncollectible accounts expense on financial statements: percent of revenue allowance method
pciable Auto Service was started on January 1, Year 1. The company experienced the following events
during its first two years of operation:
Events Affecting Year 1
- Provided $52,000 of repair services on account.
- Collected $32,000 cash from accounts receivable.
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would he 2 percent of the service revenue on account.
Events Affecting Year 2
- Wrote off a $320 account receivable that was determined to be uncollectible.
- Provided $65,000 of repair services on account.
- Collected $66,000 cash from accounts receivable.
- Adjusted the accounting records to reflect ne estimate that uncollectible accounts expense would be 1 percent of the service revenue on account. Required
- Organize the transaction data in accounts under an accounting equation.
- Determine the following amounts:
- Net income for Year 1.
- Net cash flow from operating activities for Year 1.
- Balance of accounts receivable at the end of Year 1.
- Net realizable value of accounts receivable at the end of Year 1.
c. Repeat Requirements a and b for the Year 2 accounting period.
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