Gray Bros. uses the allowance method to account for bad debts expense. Gray experienced the following four events in 2012.

1. Recognition of $48,000 of service revenue on account.

2. Collection of $42,000 cash from accounts receivable.

3. Determination that $300 of its accounts were not collectible and wrote off these receivables.

4. Recognition of uncollectible accounts expense for the year. Gray estimates that bad debts expense will be 2 percent of its service revenue.

Required

Show the effect of each of these events on the elements of the financial statements, using a horizontal statements model like the following one. Use + for increase – for decrease, and NA for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity(FA).

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Assets Liab.+ Equity Rev. -Exp. Net Inc. Cash Flow Event No. Cash + Accts. Rec. - Allow. Ret Earn.