Question

Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its first two years of operation:

Events Affecting Year 1

1. Provided $32,260 of cleaning services on account.
2. Collected $25,808 cash from accounts receivable.
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.

Events Affecting Year 2

1. Wrote off a $242 account receivable that was determined to be uncollectible.
2. Provided $37,647 of cleaning services on account.
3. Collected $33,318 cash from accounts receivable.
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.

Required
a. Organize the transaction data in accounts under an accounting equation.
b. Determine the following amounts:

1. (1) Net income for Year 1.
2. (2) Net cash flow from operating activities for Year 1.
3. (3) Balance of accounts receivable at the end of Year 1.
4. (4) Net realizable value of accounts receivable at the end of Year 1.

c. Determine the following amounts:

1. (1) Net income for Year 2.
2. (2) Net cash flow from operating activities for Year 2.
3. (3) Balance of accounts receivable at the end of Year 2.
4. (4) Net realizable value of accounts receivable at the end of Year 2.

Req A1: Organize the transaction data in accounts under an accounting equation for Year 1. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.)

ROSIE DRY CLEANING Accounting Equation for the Year 1 Event Balance Sheet Accounts Titles for Retained Earnings Assets = Equity Cash + Accounts Receivable – Allowance Retained Earnings 1. + – = 2. + – = 3. + – = Bal. + – =

Req A2: Organize the transaction data in accounts under an accounting equation for Year 2. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.)

ROSIE DRY CLEANING Accounting Equation for the Year 2 Event Balance Sheet Accounts Titles for Retained Earnings Assets = Equity Cash + Accounts Receivable – Allowance Retained Earnings Bal. + – = 1. + – = 2. + – = 3. + – = 4. + – = Bal. + – = Reg B: Determine the following amounts for the Year 1 accounting period. (Round your answers to nearest whole dollar amount.) Net income Net cash flow from operating activities Balance of accounts receivable Net realizable value of accounts receivable Req C: Determine the following amounts for the Year 2 accounting period. (Round your answers to nearest whole dollar amount.) Net income Net cash flow from operating activities Balance of accounts receivable Net realizable value of accounts receivable

Answer 1

Accounting equation

		Assets	Liabilities
Sr	Event	Cash	+Accounts receivable	Equity	Retained earnings
Year1	Cleaning services provided		32260		+32260
	Cash collected from Accounts receivable	+25808	- 25808
	Uncollectible 1%		-322.60		-322.60
Balance		$31937.40	$31937.40
Year2
	Provided services		37647		37647
	- uncollectible		-242		-242
	Collected cash	+33318	-33318
		$37405	$37405

B

1.income for the year 1

Revenue=32260

Less: 1% uncollectible exp.is-322.60

Income=$31937.40

2. Cash flow from operating

Net income =31937.40

Less:

increase in account receivable is 6129.40

Cash flow= $25808

3.

Accounts receivable at year end

$6129.40

4.Net realisable value of account receivable

$31937.40

C.

1. Net income for year 2

=$37405

2. Cash flow from operating

Net income=$37405

Less:

Increase in account recivable $4087

Cash flow=$33,318.

3. Accounts receivable

=$4087

4.Net realisable value of accounts receivable.

=$37405.