Adjusted the accounting records to reflect the estimate

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McCain Dry Cleaning was started on January 1, 2013. It experienced the following events during its first two years of operation: 

Events Affecting 2013: 

1. Provided $40,000 of cleaning services on account. 
2. Collected $38,000 cash from accounts receivable. 
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account. 

Events Affecting 2014: 

1. Wrote off a $150 account receivable that was determined to be uncollectible. 
2. Provided $65,000 of cleaning services on account. 
3. Collected $62,000 cash from accounts receivable. 
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the cleaning revenue on account.

Required: 

a. Record the events for 2013 in T-accounts. 

b. Determine the following amounts:
(1) Net income for 2013. 
(2) Net cash flow from operating activities for 2013. 
(3) Balance of accounts receivable at the end of 2013. 
(4) Net realizable value of accounts receivable at the end of 2013. 

c. Repeat Requirements a and b for the 2014 accounting period. 

Reference no: EM13929365

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