Question

Leach Inc. experienced the following events for the first two years of its operations:

1. Issued $10,000 of common stock for cash.
2. Provided $60,000 of services on account.
3. Provided $35,000 of services and received cash.
4. Collected $25,000 cash from accounts receivable.
5. Paid $22,000 of salaries expense for the year.
6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 6 percent of the ending accounts receivable balance will be uncollectible.

Year 2:

1. Wrote off an uncollectible account for $740.
2. Provided $80,000 of services on account.
3. Provided $25,000 of services and collected cash.
4. Collected $62,000 cash from accounts receivable.
5. Paid $24,000 of salaries expense for the year.
6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 6 percent of the ending accounts receivable balance will be uncollectible.

7. d-1. Organize the transaction data in accounts under an accounting equation (Horizontal Balance Sheet )
8. d-2. Prepare an income statement for Year 2.
9. d-3. Prepare the statement of changes in stockholders' equity for Year 2.
10. d-4. Prepare the balance sheet for Year 2.
11. d-5. Prepare the statement of cash flows for Year 2.
12. d-6. What is the net realizable value of the accounts receivable at December 31, Year 2?

Answer 1

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Due to character limit I am attaching the image of accounting equation.

Calculation of uncollectible amount	Amount $
Account receivable closing	35,000.00
Uncollectible %	6.00%
Uncollectible amount for year 1	2,100.00
Calculation of uncollectible amount	Amount $
Account receivable closing	52,260.00
Uncollectible %	6.00%
Uncollectible amount for year 2	3,136.00
Allowance for uncollectible accounts- opening	2,100.00
Less: Accounts written off	740.00
Allowance for uncollectible accounts- unadjusted	1,360.00
Uncollectible amount for year 2	3,136.00
Bad debt expense for year 2	1,776.00

Answer d-2
Income Statement	Amount $	Amount $
Service Revenue		105,000.00
Operating expense
Salaries Expense	24,000.00
Bad debt expense	1,776.00
Total Operating expense		25,776.00
Net Income		79,224.00
Answer d-3
Statement of changes in Stockholder's Equity	Amount $	Amount $
Beginning Common Stock	10,000.00
Add: Common Stock issued	-
Ending Common Stock		10,000.00
Beginning Retained Earnings	70,900.00
Add: Net Income	79,224.00
Ending Retained Earnings		150,124.00
Total Stockholder's Equity		160,124.00
Answer d-4
Balance Sheet	Amount $	Amount $
Assets
Cash	111,000.00
Accounts Receivable	52,260.00
Allowance for uncollectible accounts	(3,136.00)
Total Assets		160,124.00
Liabilities		-
Stockholder's Equity
Common Stock	10,000.00
Retained Earnings	150,124.00
Total Stockholder's Equity		160,124.00
Total Liabilities & Stockholder's Equity		160,124.00
Answer d-5
Statement of cash flows	Amount $	Amount $
Cash flow from operating activities
Cash sales	25,000.00
Inflow from customers	62,000.00
Payment for salaries	(24,000.00)
Net Cash flow from operating activities		63,000.00
Cash flow from investing activities		-
Cash flow from financing activities		-
Net Change in cash		63,000.00
Add: Beginning cash balance		48,000.00
Ending cash balance		111,000.00

Answer d-6
Net realizable value of Accounts Receivable	Amount $
Accounts Receivable	52,260.00
Less: Allowance for uncollectible accounts	3,136.00
Net realizable value of Accounts Receivable	49,124.00