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

[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 $29,000 of common stock for cash.
2. Provided $98,900 of services on account.
3. Provided $55,000 of services and received cash.
4. Collected $88,000 cash from accounts receivable.
5. Paid $57,000 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 $840.
2. Provided $107,000 of services on account.
3. Provided $51,000 of services and collected cash.
4. Collected $100,000 cash from accounts receivable.
5. Paid $84,000 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.

b. Prepare the income statement, statement of changes in stockholders equity, balance sheet, and statement of cash flows for Year 1. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

LEACH INC.
Income Statement
For the Year Ended December 31, Year 1
Operating expenses
Total operating expenses		0
		$0

LEACH INC.
Statement of Changes in Stockholders Equity
For the Year Ended December 31, Year 1
		$0
		0
Total stockholders equity		$0

LEACH INC.
Balance Sheet
As of December 31, Year 1
Assets
		0
Total assets		$0
Liabilities
Stockholders equity
Total stockholders' equity		0
Total liabilities and stockholders' equity		$0

LEACH INC.
Statement of Cash Flows
For the Year Ended December 31, Year 1
Cash flow from operating activities
Net cash flow from operating activities		$0
Cash flows from investing activities
Cash flows from financing activities
Net change in cash		0
Ending cash balance		$0