! Required information Exercise 7-7A Effect of recognizing uncollectible accounts on the financial statements: percent o

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! 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 $14,000 of common stock for cash. 2. Provided $82,400 of services on account. 3. Provided $40,000 of services and received cash. 4. Collected $73,000 cash from accounts receivable. 5. Paid $42,000 of salaries expense for 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. 7. Closed the revenue account. 8. Closed the expense account. Year 2: 1. Wrote off an uncollectible account for $680. 2. Provided $92,000 of services on account. 3. Provided $36,000 of services and collected cash. 4. Collected $85,000 cash from accounts receivable. 5. Paid $69,000 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 Part a 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/event, select "No journal entry required in the first account field.) Answer is complete and correct. No Transaction General Journal Debit Credit А 1 Cash 14,000 Common stock 14,000 B 2 Accounts receivable 82,400 olo Service revenue 82,400 с 3 Cash ✓ 40,000 OO Service revenue 40,000 D 4 Cash ✓ 73,000 Accounts receivable ✓ 73,000 E 5 Salaries expense 42,000 00 lol 00 Cash ✓ 42.000 F 6 470 Uncollectible accounts expense Allowance for doubtful accounts 470 G 7 Service revenue Retained earnings olol 122,400 122,400 I H 8 42,470 Retained earnings Salaries expense Uncollectible accounts expense OOO 42,000 470

X Answer is not complete. Cash Common Stock Beg. Bal. Beg. Bal. 42,000 14,000 14,000 40,000 73,000 End. Bal. 14,000 End. Bal. 85,000 Accounts Receivable Retained Earnings Beg. Bal. Beg. Bal. 82,400 $ 73,000 42,470 122,400 End, Bal. 9,400 End. Bal. 79,930 Allowance for Doubtful Accounts Service Revenue Beg. Bal. Beg. Bal. 1. x 680 X 82,400 40,000 End. Bal. 680 Bal. 122,400 End. Bal. 122,400 Beg. Bal. Uncoll. Accts. Expense 0 470 Beg. Bal. Salaries Expense 0 42,000 Bal. 470 Bal. 42,000 End. Bal. 470 End. Bal. $ 42,000

LEACH INC. Income Statement For the Year Ended December 31, Year 2 Operating expenses Total operating expenses LEACH INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 Total stockholders' equity LEACH INC. Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity

LEACH INC. Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity LEACH INC. Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Ending cash balance Net realizable value

Exercise 7-7A Part c c. What is the net realizable value of the accounts receivable at December 31, Year 1? Net realizable value

Exercise 7-7A Part d d. Repeat parts a, b, and c for Year 2. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign. Round your answers to nearest whole dollar.) View transaction list Journal entry worksheet < A B C D E F > Wrote off an uncollectible account for $680. Note: Enter debits before credits. General Journal Debit Credit Transaction 1 Record entry View general journal Clear entry Cash Common Stock Beg. Bal. Beg. Bal. End. Bal. End. Bal. Accounts Receivable Service Revenue Beg. Bal. Beg. Bal. End. Bal. End. Bal. Retained Earnings Allowance for Doubtful Accounts Beg. Bal. Beg. Bal. End. Bal. End. Bal. Salaries Expense Uncollectible Accounts Expense Beg. Bal. Beg. Bal. End. Bal. End. Bal.