Final answer:
To prepare the balance sheet for Leach Inc. for 2019, accounts receivable was calculated by subtracting cash collected and the written-off account from total services on account, and the estimated uncollectible accounts expense was determined by applying 5% to the ending accounts receivable balance.
Step-by-step explanation:
The question presents a scenario where Leach Inc. is undergoing various transactions throughout the year 2019. These transactions include offering services on account, receiving cash payments, paying salaries, writing off an uncollectible account, and adjusting accounts for estimated uncollectible accounts expense. The accounts receivable and allowance for doubtful accounts are affected by these transactions and need to be considered when preparing the balance sheet for Leach Inc.
Let's calculate the ending balance for accounts receivable (AR) and allowance for doubtful accounts (ADA), both of which are necessary for the balance sheet. We start with the total service revenue on account ($110,000), add services provided for cash ($25,000), and subtract the $700 written-off account and the cash collected from accounts receivable ($92,000).
Accounts Receivable:
Total services on account = $110,000
Cash collected on account = $92,000
Write-offs = $700
Ending Account Receivable = Total services on account - Cash collected on account - Write-offs
Ending Account Receivable = $110,000 - $92,000 - $700
Ending Account Receivable = $17,300
Allowance for Doubtful Accounts:
Estimated uncollectible expense = 5% of ending AR
Estimated uncollectible expense = 5% x $17,300
Estimated uncollectible expense = $865
Balance Sheet (Partial):
Assets:
Accounts Receivable = $17,300
Less: Allowance for Doubtful Accounts = $865
Net Accounts Receivable = $16,435
The salaries expense paid of $30,000 would be reported on the income statement, not the balance sheet. The cash collected from services ($25,000) and the cash collected from accounts receivable ($92,000) increase the cash balance but not AR.