Patel Service Co. does make a few sales on account but is mostly a cash business. Consequently, it uses the direct write-off method to account for uncollectible accounts. During 2016 Patel Service Co. earned $35,000 of cash revenue and $4,500 of revenue on account. Cash operating expenses were $19,000. After numerous attempts to collect a $120 account receivable from Sam

Stephens, the account was determined to be uncollectible in 2016.

Required

a. Record the effects of

(1) Cash revenue,

(2) Revenue on account,

(3) Cash expenses, and

(4) Write

Off of the uncollectible account on the financial statements using a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.

b. What amount of net income did Patel Service Co. report on the 2016 income statement?
c. Prepare the general journal entries for the four accounting events listed in Requirement a.

Assets - Liab. Equity Rev.Exp. Net Inc. Cash Flow Cash Accts. Rec.