Required information 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 $26,000 of common stock for cash. 2. Provided $95,600 of services on account. 3. Provided $52,000 of services and received cash. 4. Collected $85,000 cash from accounts receivable. 5. Paid $54,000 of salaries expense for the year. 6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 4 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 $750. 2. Provided $104,000 of services on account. 3. Provided $48,000 of services and collected cash. 4. Collected $97,000 cash from accounts receivable. 5. Paid $81,000 of salaries expense for the year. 6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 4 percent of the ending accounts receivable balance will be uncollectible. 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.) * Answer is complete but not entirely correct. No Transaction General Journal Debit Credit 1 750 Allowance for doubtful accounts Accounts receivable 750 B 2 Accounts receivable 104,000 Service revenue 104,000 3 48,000 Cash Service revenue 48,000 D 4 Cash 97,000 Accounts receivable 97,000 E 5 Salaries expense 81,000 Cash 81,000 TI 6 Uncollectible accounts expense 424 X Allowance for doubtful accounts 424 X Cash Common Stock Beg. Bal. Beg. Bal. End. Bal. End. Bal. Accounts Receivable Service Revenue Beg. Bal. Beg. Bal. End. Bal. End. Bal. Allowance for Doubtful Accounts Retained Earnings Beg. Bal. Beg. Bal. End. Bal. End. Bal. Salaries Expense Uncollectible Accounts Expense Beg. Bal. Beg. Bal. 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 LEACH INC. Balance Sheet As of December 31, Year 2 Assets 0 Total assets ta 0 Liabilities Stockholders' equity 0 Total stockholders' equity Total liabilities and stockholders' equity $ 0 For the Year Ended December 31, Year 2 Operating expenses Total operating expenses 0 $ 0 Answer is not complete. LEACH INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 $ 0 0
