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Problem $5-26$A $($Algo$)$ Accounting for notes receivable and uncollectible accounts using the percent of sales allowance method LO $5-1,5-4$

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The following transactions apply to Hooper Co$.$ for Year $1,$ its first year of operations:

Issued $$130,000$ of common stock for cash.

Provided $$100,000$ of services on account.

Collected $$88,000$ cash from accounts receivable.

Loaned $$11,000$ to Mosby Co$.$ on November $30,$ Year $1.$ The note had a one$-$year term to maturity and a $6$ percent interest rate.

Paid $$34,000$ of salaries expense for the year.

Paid a $$2,000$ dividend to the stockholders.

Recorded the accrued interest on December $31,$ Year $1($see item $4).$

Estimated that $1$ percent of service revenue will be uncollectible.

Problem $5-24$A $($Algo$)$ Determination of account balances$-$percent of receivables allowance method of accounting for uncollectible accounts LO $5-2$

During the first year of operation, Year $1,$ McGinnis Appliance recognized $$292,000$ of service revenue on account. At the end of Year $1,$ the accounts receivable balance was $$57,400.$ Even though this is his first year in business, the owner believes he will collect all but about $4$ percent of the ending balance.

Required

a$.$ What amount of cash was collected by McGinnis during Year $1?$

b$.$ Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis record as uncollectible accounts expense in Year $1?$

c$.$ What is the net realizable value of receivables at the end of Year $1?$

d$.$ Show the effect of these transactions on the financial statements by recording the appropriate amounts in a horizontal statements model like the one shown here. When you record amounts in the Cash Flow column, indicate whether the item is an operating activity $($OA$),$ investing activity $($IA$),$ or financing activity $($FA$).$ If element is not affected by the event, leave the cell blank.

Complete this question by entering your answers in the tabs below.

Req $A$ to $C$

a$.$ What amount of cash was collected by McGinnis during Year $1?$

b$.$ Assuming the use of an allowance system to account for uncollectible accounts, what amount should McGinnis record as uncollectible accounts expense in Year $1?($Round your final answer to nearest whole dollar amount.$)$

$\backslash$table$[[$A$.,$Cash collected$],[$B$.,$Uncollectible accounts expense,$],[$C$.,$Net realizable value,$]]$