Question

Leach Inc. experienced the following events for the first two years of its operations:

2018:
Issued $10,000 of common stock for cash.
Provided $90,000 of services on account.
Provided $33,000 of services and received cash.
Collected $57,000 cash from accounts receivable.
Paid $22,000 of salaries expense for the year.
Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.

2019:
Wrote off an uncollectible account for $700.
Provided $110,000 of services on account.
Provided $25,000 of services and collected cash.
Collected $92,000 cash from accounts receivable.
Paid $30,000 of salaries expense for the year.
Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 5 percent of the ending accounts receivable balance will be uncollectible.

Prepare an income statement

Answer 1

To prepare Leach Inc.'s income statement, total revenues from services and cash collections need to be combined with expenses from salaries and estimated uncollectible accounts. Total revenue for the two years is $258,000. To complete the income statement, the specific uncollectible accounts expense amounts are necessary, calculated as 5% of the respective year's ending accounts receivable balance.

Step-by-step explanation:

To prepare an income statement for Leach Inc., we need to calculate revenues, expenses, and ultimately the net income for the given years. The main components of an income statement are revenue, expenses, and net income or loss.

Income Statement for Leach Inc.

• Revenues
• Services provided on account: ($90,000 + $110,000)
• Services provided for cash: ($33,000 + $25,000)
• Total Revenues: $258,000
• Expenses
• Salaries Expense: ($22,000 + $30,000)
• Uncollectible Accounts Expense: (5% of ending Accounts Receivable for each year)
• Total Expenses: Unknown without ending Accounts Receivable.
• Net Income
• Net Income = Total Revenues - Total Expenses

To finalize the income statement, we need the exact amount of uncollectible accounts expense, which is based on the ending accounts receivable balances for 2018 and 2019.