Required information Exercise 7-7A (Static) 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 $78,000 of services on account. 3. Provided $36,000 of services and received cash. 4. Collected $69,000 cash from accounts receivable. 5. Paid $38,000 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 $650. 2. Provided $88,000 of services on account. 3. $32,000 of services and collected cash. 4. Collected $81,000 cash from accounts receivable. 5. Paid $65,000 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. Exercise 7-7A (Static) Part 6 b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year 1. b. Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year 1. Complete this question by entering your answers in the tabs below. Req B Inc Stmt Reg B Stmt SE Reg B Bal Sheet Reg B Stmt Cash Flows Prepare the income statement for Year 1. LEACH INC. Income Statement For the Year Ended December 31, Year 1 Operating expenses Total operating expenses Req B Inc Stmt Reg B Stmt SE Req B Bal Sheet Req B Stmt Cash Flows Prepare the statement of changes in stockholders' equity for Year 1. LEACH INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 1 Beginning common stock Ending common stock $ 0 Beginning retained earnings Ending retained earnings Total stockholders' equity 0 0 $ CA Req B Inc Stmt Req B Stmt SE Req B Bal Sheet Req B Stmt Cash Flows Prepare the balance sheet for Year 1. LEACH INC. Balance Sheet As of December 31, Year 1 Assets 0 $ GA 0 Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity 0 0 $ Req B Inc Stmt Req B Stmt SE Req B Bal Sheet Req B Stmt Cash Flows Prepare the statement of cash flows for Year 1. (Amounts to be deducted and cash outflows should sign.) LEACH INC. Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities: 0 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities 0 Net change in cash 0 Ending cash balance $ 0
