Requlred Informatlon

Exercise $7\mathrm{.}7$A $($Algo$)$ Effect of recognizing uncollectible accounts on the financial statements: percent of

receivables allowance method $LO7*2$

$[$The following information applies to the questions displayed below.$]$

Leach Incorporated experienced the following events for the first two years of its operations.

Year $1$:

Issued $$16,000$ of common stock for cash.

Provided $$84,600$ of services on account.

Provided $$42,000$ of services and received cash.

Collected $$75,000$ cash from accounts receivable.

Paid $$44,000$ of salaries expense for the year.

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.

Closed the revenue account.

Closed the expense accounts.

Year $2$:

Wrote off an uncollectible account for $$950.$

Provided $$94,000$ of services on account.

Provided $$38,000$ of services and collected cash.

Collected $$87,000$ cash from accounts receivable.

Paid $$71,000$ of salaries expense for the year.

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.

Closed the revenue account.

Closed the expense accounts.

Exerclse $7-7$A $($Algo$)$ Part b

b$.$ Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year $1.$

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Req B$2$

Prepare the income statement for Year $1.$

LEACH INCORPORATED

Income Statement

For the Year Ended December $31.$ Year $1$