Question

Holloway Company earned $18,000 of service revenue on account during Year 1. The company collected $14.000 cash from accounts receivable during Year 1. Required Based on this information alone, determine the following for Holloway Company. a. The balance of the accounts receivable that would be reported on the December 31, Year 1, balance sheet. b. The amount of net income that would be reported on the Year 1 income statement. c. The amount of net cash flow from operating activities that would be reported on the Year 1 statement of cash flows. d. The amount of retained earnings that would be reported on the Year 1 balance sheet.

Answer 1

a. $4000 Dr. of Accounts Receivable Would be reported on December 31, Year 1 in Balance Sheet (See Below)

Beg. Bal. Service Revenue Accounts Receivable $0 Cash $18,000 End. Bal. $18,000 $14,000 $4,000 $18,000

b. Net Income would be $18,000 i.e. Service Revenue (Since other information is not given therefore assuming that only service revenue is the solely transaction during the year)

c. Net cash flow from operating activity $14,000

Explanation:

assuming that only service revenue and cash received from accounts receivable is the solely transaction during the year. and therefore cash received from accounts receivable would be inflow of cash flow from operating activities.

d. Retained Earnings $18,000 i.e. Net Income would be transferred to retained earnings account.

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