Question

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Leach Inc, experienced the following events for the first two years of its operations: 2018 1. Issued $10,000 of common stock for cash 2. Provided $90,000 of services on account. 3. Provided $27,000 of services and received cash. 4. Collected $63,000 cash from accounts receivable. 5. Paid $16,000 of salaries expense for the year. 6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 8 percent of the ending accounts receivable balance will be uncollectible. 2019 1. Wrote off an uncollectible account for $690. 2. Provided $110,000 of services on account. 3. Provided $30,000 of services and collected cash. 4. Collected $92,000 cash from accounts receivable. 5. Paid $30,000 of salaries expense for the year. 6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 8 percent of the ending accounts receivable balance will be uncollectible.

Answer 1

+ + Leach Inc 2018 Assets Equity Account Titles for Events Cash Accounts Rec - Allowance = Liabilties + Common Stock + Retained Earnings Retained Earnings Calculation 10,000 10,000 + 90,000 90,000 Service Revenue 27,000 27,000 Service Revenue 63,000 (63,000) - (16,000) (16,000) Salaries expense 2,160 = (2,160) Uncollectible Accounts exp=27,000*8% Bal. 84,000 27,000 - 2,160 = 10,000 + 98,840 + + + +

117,000 Leach Inc Income Statement For year ended Dec 31, Year 2018 Service Revenue Operating expenses Salaries expense Uncollectible Accounts expense Total Operating expenses Net Income 16,000 2,160 18,160 98,840 Statement of Changes in Stockholders Equity For year ended Dec 31, Year 2018 Beginning common Stock Issue of common stock Ending common Stock 10,000 10,000 98,840 Beginning Retained Earnings Net Income Ending Retained Earnings Total Stockholders Equity 98,840 108,840

Leach Inc Balance Sheet As of Dec 31, Year 2018 Assets Cash Accounts Receivable Allowance for Uncollectible Accounts Accounts Receivable, Net Total Assets 84,000 27,000 (2,160) 24,840 108,840 Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 10,000 98,840 108.840 108,840 Net realizable value of Accts Rec 24,840

CASHFLOWS - DIRECT Method

Leach Inc Statement of cashflows For year ended Dec 31, Year 2018 Cashflows from operating activities Cash received from cash sales Cash received from credit sales Cash paid for salaries Net Cashflows from operating activities 27,000 63,000 (16,000) 74,000 Cashflows from investing activities Cashflows from financing activities Inflow for issue of common stock Net change in cash Beginning cash balance Ending cash balance 10,000 84,000 84,000

CASHFLOWS - INDIRECT Method

Leach Inc Statement of cashflows For year ended Dec 31, Year 2018 Cashflows from operating activities Net Income Changes in Working Capital Increase in Accounts Receivable Increase in Allowance for Uncollectible Accounts Net Cashflows from operating activities 98,840 (27,000) 2,160 74,000 Cashflows from investing activities Cashflows from financing activities Inflow for issue of common stock Net change in cash Beginning cash balance Ending cash balance 10,000 84,000 84,000

YEAR 2019

+ + + 2019 Assets Equity Events Cash Accounts Rec - Allowance = Liabilties + Common Stock + Retained Earnings Calculation Bal. 84,000 27,000 - 2,160 = 10,000 + 98,840 (690) - (690) = 110,000 110,000 Service Revenue 30,000 30,000 Service Revenue 92,000 (92,000) - (30,000) (30,000) Salaries expense 2,075 = (2,075) Uncollectible Accounts exp =(44,310*8%)-2,160+690 Bal. 176,000 44,310 - 3,545 = 10,000 + 206,765 + + + +

140,000 Leach Inc Income Statement For year ended Dec 31, Year 2019 Service Revenue Operating expenses Salaries expense Uncollectible Accounts expense Total Operating expenses Net Income 30,000 2,075 32,075 107,925 Statement of Changes in Stockholders Equity For year ended Dec 31, Year 2019 Beginning common Stock Issue of common stock Ending common Stock 10,000 10,000 98,840 107,925 Beginning Retained Earnings Net Income Ending Retained Earnings Total Stockholders Equity 206,765 216,765

Leach Inc Balance Sheet As of Dec 31, Year 2019 Assets Cash Accounts Receivable Allowance for Uncollectible Accounts Accounts Receivable, Net Total Assets 176,000 44.310 (3,545) 40,765 216,765 Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 10,000 206,765 216,765 216,765 Net realizable value of Accts Rec 40,765

CASHFLOWS - DIRECT Method

Leach Inc Statement of cashflows For year ended Dec 31, Year 2019 Cashflows from operating activities Cash received from cash sales Cash received from credit sales Cash paid for salaries Net Cashflows from operating activities 30,000 92,000 (30,000) 92,000 Cashflows from investing activities Cashflows from financing activities Net change in cash Beginning cash balance Ending cash balance 92.000 84,000 176,000

CASHFLOWS - INDIRECT Method

Calculation Leach Inc Statement of cashflows For year ended Dec 31, Year 2019 Cashflows from operating activities Net Income Changes in Working Capital Increase in Accounts Receivable Increase in Allowance for Uncollectible Accounts Net Cashflows from operating activities 107,925 (17,310) = 27,000-44,310 1,385 =3,545-2,160 92,000 Cashflows from investing activities Cashflows from financing activities Net change in cash Beginning cash balance Ending cash balance 92,000 84,000 176,000