Holmes Cleaning Service began operation on January 1, Year 1. The company experienced the following events for its first year of operations: Events Affecting Year 1: Provided $190,000 of cleaning services on account. Collected $142,500 cash from accounts receivable. Paid salaries of $42,000 for the year. Adjusted the accounts to reflect managements expectations that uncollectible accounts expense would be $1,400. The expense was determined using the percent of revenue method.

Required: Organize the transaction data in accounts under an accounting equation. Prepare an income statement, a balance sheet, and a statement of cash flows for Year 1.