Required information Exercise 7-7A (Algo) 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 $10,000 of common stock for cash. 2. Provided $60,000 of services on account. 3. Provided $31,000 of services and received cash. 4. Collected $29,000 cash from accounts receivable, 5. Paid $16,000 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. Year 2: 1. Wrote off an uncollectible account for $2,560. 2. Provided $80,000 of services on account. 3. Provided $30,000 of services and collected cash. 4. Collected $62,000 cash from accounts receivable, 5. Paid $24,000 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 Part 2 of 4 Complete this question by entering your answers in the tabs below. 7.14 points Req B Inc Stmt Req B Stmt SE Req B Bal Sheet Req B Stmt Cash Flows eBook Prepare an income statement for Year 1. Hint Print LEACH INC. Income Statement For the Year Ended December 31, Year 1 Service revenue Operating expenses Uncollectible accounts expense Salaries expense 16,000 (16,000) Total operating expenses Net income RB Inc Stmt Req B Stmt SE > of 14 Ne 6 7 8 Required information b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement Complete this question by entering your answers in the tabs below. Req B Inc Req B Stmt SE Req B Bal Stmt Shegt Prepare the balance sheet for Year 1. Req B Stmt Cash Flows LEACH INC. Balance Sheet As of December 31, Year 1 0 $ 0 Assets Cash Accounts receivable Less: Allowance for doubtful accounts Total assets Liabilities Stockholders' equity Common stock Retained earnings $ 10,000 Total stockholders' equity Total liabilities and stockholders' equity 10,000 10,000 $ Part 2 of 4 b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet and statement of cas Complete this question by entering your answers in the tabs below. 7.14 points Req B Inc Stmt Req B Stmt SE Req B Bal Sheet Req B Simt Cash Flows eBook Prepare the statement of cash flows for Year 1. (Amounts to be deducted and cash outflows should be indicated with a Hint sign.) Print LEACH INC. Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Inflow from customers Outflow for expenses $ 0 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities 0 0 Net change in cash Plus: Beginning cash balance Ending cash balance $ 0
