Practice Problem #$7$: Comprehensive problem $($percent of receivables allowance method$)$

The following trial balance was prepared for Village Cycle Sales and Service $($VCSS$)$ on December $31,$

Year $1,$ after the closing entries were posted:

Village Cycle had the following transactions in Year $2$:

Purchased merchandise on account for $$260,000.$

Sold merchandise that cost $$243,000$ on account for $$340,000.$

Performed $$80,000$ of services for cash.

Sold merchandise for $$60,000$ to credit card customers. The merchandise cost $$41,250.$ The credit

card company charges a $5$ percent fee.

Collected $$348,000$ cash from accounts receivable.

Paid $$265,000$ cash on accounts payable.

Paid $$115,000$ cash for selling and administrative expenses.

Collected cash for the full amount due from the credit card company $($see item $4).$

Loaned $$50,000$ to Lee Supply on October $1.$ The note had a $9$ percent interest rate and a one$-$year

term to maturity.

Wrote off $$830$ of accounts as uncollectible.

Made the following adjusting entries:

a$.$ Recorded accrued interest on the note at December $31,$ Year $2($see item $9).$

b$.$ Adjusted the accounting records to reflect uncollectible account expense for the year. VCSS

estimates estimated the amount of ending accounts receivable balance that would be uncollectible

using the following analysis:

$1.$ Prepare general journal entries for these transactions and post the entries $($including adjustments$)$ to T$-$accounts.

$2.$ Prepare a mutli$-$step income statement, a statement of changes in stockholder's equity, and a balance sheet for year $2.$

$3.$ Calculate net cash flows from OA$,$ IA$,$ and FA for year $2.$