Gray Bros, uses the allowance method to account for uncollectible accounts expense. Gray experienced the following four

Question:

Gray Bros, uses the allowance method to account for uncollectible accounts expense. Gray experienced the following four events in 2005:

1. Recognized $$48,000$ of revenue on account.

2. Collected $$42,000$ cash from accounts receivable.

3. Determined that $$300$ of accounts receivable were not collectible and wrote them off.

4. Recognized uncollectible accounts expense for the year. Gray estimates that uncollectible accounts expense will be 2 percent of its sales.

Required:

Show the effect of each of these events on the elements of the financial statements, using a horizontal statements model like the following one. Use + for increase, — for decrease, and NA for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA).

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