Question

Exercise 7-7A Effect of recognizing uncollectible accounts on the financial statements: percent of receivables allowance method LO 7-2

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

Year 1:

1. Issued $27,000 of common stock for cash.
2. Provided $96,700 of services on account.
3. Provided $53,000 of services and received cash.
4. Collected $86,000 cash from accounts receivable.
5. Paid $55,000 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.
7. Closed the revenue account.
8. Closed the expense account.

Year 2:

1. Wrote off an uncollectible account for $820.
2. Provided $105,000 of services on account.
3. Provided $49,000 of services and collected cash.
4. Collected $98,000 cash from accounts receivable.
5. Paid $82,000 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.

Please show the journal entry and how it is calculated for part #6, This is for year 2

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.

Answer 1