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 $29,810 of cleaning services on account.
2. Collected $23,848 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 $224 account receivable that was determined to be uncollectible.
2. Provided $34,788 of cleaning services on account.
3. Collected $30,787 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. Record the events for Year 1 and Year 2 in T-accounts.
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. Repeat Requirements b for the Year 2 accounting period.

	Cash Retained Earnings Year 1 Beg. Bal. 2. 23,848 Bal. 23,848 End. Bal. Year 2 3. 30,787 End. Bal. 54,635 Accounts Receivable Service Revenue Year 1 Year 1 1. 29,810 23,848 2. Bal. 5,962 Bal. Year 2 Year 2 2. 34,788 224 1. 30,787 3. End. Bal. 9,739 End. Bal. Allowance for Doubtful Accounts Uncollectible Accounts Expense Year 1 Year 1 Bal. Bal. Year 2 Year 2 1. 224 End. Bal. 224 End. Bal.

Determine the following amounts: (Round your intermediate calculations to nearest whole dollar.)
(1) Net income for Year 1.
(2) Net cash flow from operating activities for Year 1.
(3) Balance of accounts receivable at the end of Year 1.
(4) Net realizable value of accounts receivable at the end of Year 1.

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

Repeat Requirements b for the Year 2 accounting period. (Round your intermediate calculations to nearest whole dollar.)

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

Answer 1

Solution: