Question

[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 $10,000 of common stock for cash.
2. Provided $78,000 of services on account.
3. Provided $36,000 of services and received cash.
4. Collected $69,000 cash from accounts receivable.
5. Paid $38,000 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 $650.
2. Provided $88,000 of services on account.
3. Provided $32,000 of services and collected cash.
4. Collected $81,000 cash from accounts receivable.
5. Paid $65,000 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.

b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1. (Statement of Cash Flows and Balance Sheet only: Items to be deducted must be indicated with a minus sign.)
  

Next Visit question map

Question 4 linked to 5 and 6 of 10 Total

Answer 1

b.

Leach Inc. Income Statement For the Year Ended December 31, Year 1
	Service Revenue		$114,000
	Operating Expenses
	Salaries Expense	$38,000
	Uncollectible Accounts Expense	450
	Total Operating Expenses		(38,450)
	Net Income		$75,550
Leach Inc. Statement of Changes in Stockholders’ Equity For the Year Ended December 31,Year 1
	Beginning Common Stock	$   â€˜ -0-
	Plus: Common Stock Issued	10,000
	Ending Common Stock		$10,000
	Beginning Retained Earnings	-0-
	Plus: Net Income	75,550
	Ending Retained Earnings		$75,550
	Total Stockholders’ Equity		$85,550

Leach Inc. Balance Sheet As of December 31, Year 1
	Assets
	Cash		$77,000
	Accounts Receivable	$ 9,000
	Less: Allowance for Doubtful Accounts	(450)	8,550
	Total Assets		$85,550
	Liabilities		$   -0-
	Stockholders’ Equity
	Common Stock	$10,000
	Retained Earnings	75,550
	Total Stockholders’ Equity		85,550
	Total Liabilities and Stockholders’ Equity		$85,550

Leach Inc. Statement of Cash Flows For the Year Ended December 31, Year 1
	Cash Flows From Operating Activities:
	Inflow from Customers	$105,000
	Outflow for Expenses	(38,000)
	Net Cash Flow from Operating Activities		$67,000
	Cash Flows From Investing Activities		-0-
	Cash Flows From Financing Activities
	Inflow for Issue of Common Stock		10,000
	Net Change in Cash		77,000
	Plus: Beginning Cash Balance		-0-
	Ending Cash Balance		$77,000