The following transactions apply to Jova Company for Year 1, the first year of operation: 1. Issued

Question:

The following transactions apply to Jova Company for Year 1, the first year of operation:
1. Issued $10,000 of common stock for cash.
2. Recognized $210,000 of service revenue earned on account.
3. Collected $162,000 from accounts receivable.
4. Paid operating expenses of $125,000.
5. Adjusted accounts to recognize uncollectible accounts expense. Jova uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 1 percent of sales on account.
The following transactions apply to Jova for Year 2:
1. Recognized $320,000 of service revenue on account.
2. Collected $335,000 from accounts receivable.
3. Determined that $2,150 of the accounts receivable were uncollectible and wrote them off.
4. Collected $800 of an account that had previously been written off.
5. Paid $205,000 cash for operating expenses.
6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 0.5 percent of sales on account.

Required
Complete the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior to beginning the requirements for Year 2.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange).
b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. Use + for increase, − for decrease, and NA for not affected. Also, in the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example.

Statement Balance Sheet Income Statement Event of Cash Llab. Assets = Net Inc. + Stk. Equlty Exp. No. Flows Rev. NA NA 1

c. Organize the transaction data in accounts under an accounting equation.
d. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

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