Question

holloway company earned $7,500 of service revenue on account during year 1. the company collected $6,375 cash from accounts receivable during year 1. required: based on this information alone, determine the following for holloway company. (hint: record the events in general ledger accounts under an accounting equation before satisfying the requirements.) 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. complete this question by entering your answers in the tabs below. accounting equation req a to d based on this information alone, determine the following for holloway company. (hint: record the events in general ledger accounts under an accounting equation before satisfying the requirements.) note: not all cells require input. enter any decreases to account balances with a minus sign. holloway company effect of events on the year 1 accounting equation assets = liabilities + stockholders equity event cash + accounts receivable = + common stock + retained earnings

Explanation:

Step1: Calculate accounts - receivable balance

Accounts - receivable increases with service revenue on - account and decreases with cash collections. Initial increase is $7,500 and decrease is $6,375. So, the balance is $7500 - 6375$.
$7500−6375 = 1125$

Step2: Determine net income

Net income is equal to service revenue earned. Service revenue is $7,500$.
Net income=$7500$

Step3: Calculate net cash - flow from operating activities

The net cash - flow from operating activities is the cash collected from accounts receivable, which is $6,375$.
Net cash - flow from operating activities = $6375$

Step4: Determine retained earnings

Retained earnings increase by the amount of net income. Since net income is $7,500$, retained earnings is $7,500$.
Retained earnings=$7500$

Answer:

a. $1,125
b. $7,500
c. $6,375
d. $7,500