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Required information Skip to question [The following information applies to the questions displayed below.] Leach Inc....

Required information

Skip to 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 $110,000 of services on account.
  3. Provided $33,000 of services and received cash.
  4. Collected $77,000 cash from accounts receivable.
  5. Paid $14,000 of salaries expense for the year.
  6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.

Year 2:

  1. Wrote off an uncollectible account for $690.
  2. Provided $130,000 of services on account.
  3. Provided $15,000 of services and collected cash.
  4. Collected $112,000 cash from accounts receivable.
  5. Paid $26,000 of salaries expense for the year.
  6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 7 percent of the ending accounts receivable balance will be uncollectible.
  1. d-1. Organize the transaction data in accounts under an accounting equation.
  2. d-2. Prepare an income statement for Year 2.
  3. d-3. Prepare the statement of changes in stockholders' equity for Year 2.
  4. d-4. Prepare the balance sheet for Year 2.
  5. d-5. Prepare the statement of cash flows for Year 2.
  6. d-6. What is the net realizable value of the accounts receivable at December 31, Year 2?

Solutions

Expert Solution

LEACH INC.
Accounting Equation
Event Assets = Liabilities + Equity Accounting Titles for Retained
Cash + Accounts Receivable - Allowance Common Stock + Retained Earnings Earnings
year-1
1 $10,000.00 + - = + $10,000.00 + NA
2 + $110,000.00 - = + + $110,000.00 Service revenue
3 $33,000.00 + - = + + $33,000.00 Service revenue
4 $77,000.00 + -$77,000.00 - = + + NA
5 -$14,000.00 + - = + + -$14,000.00 Salaries expense
6 + - $2,310.00 = + + -$2,310.00 Uncollectible a/c expense
(110000-77000)*7%
Bal. $106,000.00 + $33,000.00 - $2,310.00 = $0.00 + $10,000.00 + $126,690.00
Year-2
1 -690 -$690 NA
2 130000 $130,000 Service revenue
3 15000 $15,000 Service revenue
4 112000 -112000 NA
5 -26000 -$26,000 Salaries expense
6 $3,522 -$3,522 Bade Debt Expense
(50310*7%)
Bal. $207,000.00 + $50,310.00 - $5,142 = $0 + $10,000 + $242,168
Income Statement for the year 2
Service Revenue $145,000.00
Less:
Salaries Expenses -$26,000.00
Bad Debt Expense -$35,222.00
Net Income $83,778.00
Statement of change in Stockholder Equity
For the year -2
Common Stock 10000
Retained Earning 242168
Stockholder Equity 252168
Balance Sheet For the year-2
Cash $207,000.00
Accounts Receivable $50,310.00
Less: Allowance -$5,142.00 $45,168.00
Total Assets $252,168.00
Stockholder Equity $252,168.00
Total Liabi and Equity $252,168.00

ekkarill92 answered 1 year ago
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