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:

1. Provided $170,000 of cleaning services on account.
2. Collected $127,500 cash from accounts receivable.
3. Paid salaries of $44,000 for the year.
4. Adjusted the accounts to reflect managements expectations that uncollectible accounts expense would be $1,900. The expense was determined using the percent of revenue method.

c. Prepare an income statement, 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.)

HOLMES CLEANING SERVICE
Income Statement
For the Year Ended December 31, Year 1
Service revenue		$170,000
Operating expenses
Salaries expense	$44,000
Uncollectible accounts expense	1,900
Total operating expenses		45,900
Net income		$124,100

HOLMES CLEANING SERVICE
Balance Sheet
As of December 31, Year 1
Assets
Cash		$83,500
Accounts receivable	$43,000
Less: Allowance for doubtful accounts		43,000
Total assets		$126,500
Liabilities		$0
Stockholders equity
Retained earnings	$124,100
Total stockholders' equity		124,100
Total liabilities and stockholders' equity		$124,100

HOLMES CLEANING SERVICE
Statement of Cash Flows
For the Year Ended December 31, Year 1
Cash flow from operating activities
Cash inflow from customers	$127,500
Cash outflow for expenses	(44,000)
	0
Net cash flow from operating activities		$83,500
Cash flows from investing activities		0
Cash flows from financing activities		0
Net change in cash		83,500
Plus: Beginning cash balance		0
Ending cash balance		$83,500