Question
In: Accounting
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:
- Issued $10,000 of common stock for cash.
- Provided $110,000 of services on account.
- Provided $33,000 of services and received cash.
- Collected $77,000 cash from accounts receivable.
- Paid $14,000 of salaries expense for the year.
- 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:
- Wrote off an uncollectible account for $690.
- Provided $130,000 of services on account.
- Provided $15,000 of services and collected cash.
- Collected $112,000 cash from accounts receivable.
- Paid $26,000 of salaries expense for the year.
- 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.
- d-1. Organize the transaction data in accounts under an accounting equation.
- d-2. Prepare an income statement for Year 2.
- d-3. Prepare the statement of changes in stockholders' equity for Year 2.
- d-4. Prepare the balance sheet for Year 2.
- d-5. Prepare the statement of cash flows for Year 2.
- 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 |
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