Faello Inc. experienced the following events in its first two years of operations: - Adjusted accounting records to reflect uncollectible accounts expense of 7% of the ending accounts receivable balance for the year. - Prepared the income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for 2014. The income statement showed revenues of $133,000 and net profits of $114,690. The balance sheet showed total assets and total stockholders' equity of $114,690 as of December 2014.

1. Faello Inc. experienced the following events for the first two years of its operations:
Adjusted the accounting records to reflect uncollectible accounts expense for the year. Faello
estimates that 7 percent of the ending accounts receivable balance will be uncollectible.
Adjusted the accounts to reflect uncollectible accounts expense for the year. Faello estimates that
7 percent of the ending accounts receivable balance will be uncollectible.
b1. Prepare the income statement for 2014.
b2- Prepare the statement of changes in stockholders' equity for 2014
Prepare the balance sheet for 2014
Prepare the statement of cash flows for 2014. (Amounts to be deducted should be indicated with
a minus sign.)2014:
Solution
Income StatementFor The year December 2014 Service Revenue =100000+33000 133000
Operating Expenses salaries expense 16000 Provison for Uncollectible Account 2310
(=+(100000-67000)*0.07) Total Operating Expenses 18310 Net Profit 114690
Statement Of Change In Stockholder Equity 2 For The year December 2014 Beginning
Retained Earning 0 Current Year Profit 114690 Total St0keholder Equity 114690 Balance
sheet As on December 2014 Asset Cash =(33000+67000-16000) 84000 Account
Receivable(10000-67000-2310) 30690 Total Asset 114690 Liability Total St0keholder
Equity 114690 Statement Of Cash flow statement 2014 Cash flow From Operating Profit
Net Profit 114690 Increase in Account Receivable -30690 Net Cash Flow From Operating
Activity 84000 Cash flow from investing Activity 0 Cash flow from Finance Activity 0 Net
Change In cash 84000 Opening Cash flow 0 Closing Cash flow 84000