Exercise 7-7A Effect of recognizing uncollectible accounts on the financial statements: percent of receivables allowance method LO 7-2

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[The following information applies to the questions displayed below.] Leach Inc. experienced the following events for the first two years of its operations: Year 1:

1. Issued $12,000 of common stock for cash.
2. Provided $80,200 of services on account.
3. Provided $38,000 of services and received cash.
4. Collected $71,000 cash from accounts receivable.
5. Paid $40,000 of salaries expense for the year.
6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.
7. Closed the revenue account.
8. Closed the expense account.

Year 2:

1. Wrote off an uncollectible account for $660.
2. Provided $90,000 of services on account.
3. Provided $34,000 of services and collected cash.
4. Collected $83,000 cash from accounts receivable.
5. Paid $67,000 of salaries expense for the year.
6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.

Exercise 7-7A Part d

d. Repeat parts a, b, and c for Year 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign. Round your answers to nearest whole dollar.)

View transaction list View journal entry worksheet Credit No Transaction General Journal A 1 Allowance for doubtful accounts Accounts receivable Debit 660 660 B 2 90,000 Accounts receivable Service revenue 90,000 C 3 34,000 Cash Service revenue 34,000 K D 4 83,000 Cash Accounts receivable 83,000 E 5 67,000 Salaries expense Cash 67,000 IF 6 Uncollectible accounts expense Allowance for doubtful accounts Cash Common Stock Beg. Bal. Beg. Bal. 3. 14. 67,000 34,000 83,000 End. Bal. 50,000 End. Bal. Accounts Receivable Service Revenue Beg. Bal. 12. Beg. Bal. 90,000 660 1. 83,000 4. 90,000 2. 34,000 13. End. Bal. 6,340 End. Bal. 124,000 Retained Earnings Allowance for Doubtful Accounts Beg. Bal. 1. Beg. Bal. 660 End. Bal. 660 End. Bal. Salaries Expense Uncollectible Accounts Expense Beg. Bal. Beg. Bal. 67,000 End. Bal. 67,000 End. Bal. LEACH INC. Income Statement For the Year Ended December 31, Year 2 Operating expenses Total operating expenses 0 $ 0 LEACH INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 $ 0 0 Total stockholders' equity $ 0 LEACH INC. Balance Sheet As of December 31, Year 2 Assets 0 0 $ Total assets Liabilities Stockholders' equity 0 Total stockholders' equity Total liabilities and stockholders' equity $ 0 LEACH INC. Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities $ 0 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash 0 Ending cash balance $ 0 Net realizable value