Year 1:

1. Issued $10,000 of common stock for cash.
2. Provided $60,000 of services on account.
3. Provided $35,000 of services and received cash.
4. Collected $25,000 cash from accounts receivable.
5. Paid $18,000 of salaries expense for the year.
6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.

Year 2:

1. Wrote off an uncollectible account for $660.
2. Provided $80,000 of services on account.
3. Provided $20,000 of services and collected cash.
4. Collected $62,000 cash from accounts receivable.
5. Paid $26,000 of salaries expense for the year.
6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.

Exercise 7-7A Part b

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

LEACH INC.
Income Statement
For the Year Ended December 31, Year 1
Service revenue
Operating expenses
Salaries expense	$18,000
Uncollectible accounts expense	2,450
Total operating expenses		(20,450)
Net income		$74,550

LEACH INC.
Statement of Changes in Stockholders Equity
For the Year Ended December 31, Year 1
Beginning common stock	$0
Plus: Common stock issued	10,000
Ending common stock		$10,000
Beginning retained earnings	0
Plus: Net income
Ending retained earnings		0
Total stockholders equity		$10,000

LEACH INC.
Balance Sheet
As of December 31, Year 1
Assets
Cash
Accounts receivable	$49,350
Less: Allowance for doubtful accounts		49,350
Total assets		$49,350
Liabilities
Stockholders equity
Common stock
Retained earnings
Total stockholders equity		0
Total liabilities and stockholders equity		$0

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
Net cash flow from operating activities		$0
Cash flows from investing activities
Cash flows from financing activities
Inflow for issue of common stock
Net change in cash		0
Plus: Beginning cash balance
Ending cash balance		$0