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 $28.000 of common stock for cash. 2. Provided $97.800 of services on account 3. Provided $54,000 of services and received cash. 4. Collected $87.000 cash from accounts receivable. 5. Paid $56,000 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 $850. 2. Provided $106.000 of services on account. 3. Provided $50,000 of services and collected cash. 4. Collected $99.000 cash from accounts receivable. 5. Paid $83.000 of salaries expense for the year. 8. 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. Required: a. Record the Year 1 events in general journal form and post them to T-accounts. (If no entry is required for a transaction/eve "No journal entry required" In the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit A 1 Cash 28.000 Common stock 28.000 B 2 Accounts receivable 97,800 Service revenue 97.800 C 3 Cash 54,000 Service revenue 54.000 D 4 Cash 87,000 Accounts receivable 87.000 E 5 58,000 Salaries expense Cash 58.000 F 6 Uncollectible accounts expense 432 Allowance for doubtful accounts 432 7 151.800 Service revenue Retained earnings 151.800 H 8 58.432 Retained earnings Salaries expense Uncollectible accounts expense 50.000 432 b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet for Year 1. (Balance Sheet only: Items to be deducted must be Indicated with a minus slgn.) LEACH INC. Income Statement For the Year Ended December 31, Year 1 Operating expenses Total operating expenses 0 S 0 LEACH INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 S 0 0 Total stockholders' equity S 0 LEACH INC. Balance Sheet As of December 31, Year 1 Assets 0 $ Total assets Liabilities Stockholders' equity 0 Total stockholders' equity Total liabilities and stockholders' equity S 0