Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its
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Question:
Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its first two years of operation:
Events Affecting Year 1
- Provided $33,430 of cleaning services on account.
- Collected $26,744 cash from accounts receivable.
- Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.
Events Affecting Year 2
- Wrote off a $251 account receivable that was determined to be uncollectible.
- Provided $39,013 of cleaning services on account.
- Collected $34,527 cash from accounts receivable.
- Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.
Required
- Organize the transaction data in accounts under an accounting equation for each year.
- Determine the following amounts:
- (1) Net income for Year 1.
- (2) Net cash flow from operating activities for Year 1.
- (3) Balance of accounts receivable at the end of Year 1.
- (4) Net realizable value of accounts receivable at the end of Year 1.
- Determine the following amounts:
- (1) Net income for Year 2.
- (2) Net cash flow from operating activities for Year 2.
- (3) Balance of accounts receivable at the end of Year 2.
- (4) Net realizable value of accounts receivable at the end of Year 2.
Leach Inc. experienced the following events for the first two years of its operations:
Year 1:
- Issued $10,000 of common stock for cash.
- Provided $80,000 of services on account.
- Provided $27,000 of services and received cash.
- Collected $53,000 cash from accounts receivable.
- Paid $20,000 of salaries expense for the year.
- 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:
- Wrote off an uncollectible account for $700.
- Provided $100,000 of services on account.
- Provided $30,000 of services and collected cash.
- Collected $82,000 cash from accounts receivable.
- Paid $26,000 of salaries expense for the year.
- 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.
- Organize the transaction data in accounts under an accounting equation.
- Prepare the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Year 1.
- What is the net realizable value of the accounts receivable at December 31, Year 1?
Related Book For
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds
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