Exercise 7-7A (Algo) Effect of recognizing uncollectible accounts on the financial statements: Percent of receivables allowance method LO 7-2

Leach Incorporated experienced the following events for the first two years of its operations:

Year 1: Issued $10,000 of common stock for cash.

Provided $70,000 of services on account.

Provided $33,000 of services and received cash.

Collected $37,000 cash from accounts receivable.

Paid $14,000 of salaries expense for the year.

Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.

Year 2: Wrote off an uncollectible account for $2,540.

Provided $90,000 of services on account.

Provided $20,000 of services and collected cash.

Collected $72,000 cash from accounts receivable.

Paid $32,000 of salaries expense for the year.

Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.

Exercise 7-7A (Algo) Part d

d-1. Organize the transaction data in accounts under an accounting equation for Year 2.

d-2. Prepare an income statement for Year 2.

d-3. Prepare the statement of changes in stockholders' equity for Year 2.

d-4. Prepare the balance sheet for Year 2.

d-5. Prepare the statement of cash flows for Year 2.

d-6. What is the net realizable value of the accounts receivable at December 31, Year 2?