1. Issued $15,000 of common stock for cash. 2. Recognized $70,000 of service revenue earned on account. 3. Collected $62,000 from accounts receivable. 4. Paid operating expenses of $35,900. 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 2 percent of sales on account. The following transactions apply to Jova for Year 2: 1. Recognized $77,500 of service revenue on account. 2. Collected $70,000 from accounts receivable. 3. Determined that $1,000 of the accounts receivable were uncollectible and wrote them off. 4. Collected $200 of an account that had previously been written off. 5. Paid $49,500 cash for operating expenses. 6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 1 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. Req D1 Income Stmt Req Di Stmt Reg D1 Req D1 Stmt of Changes Balance Sheet of Cash Flows Prepare an income statement for Year 1. Financial Statements Income Statement For the Year Ended Year 1 Service revenue Expenses Operating expenses $ 35,900 Uncollectible accounts expense 1,400 $ 70,000 Total expenses Net income 37,300 $ $ 32,700 Req D1 Reg D1 Stmt Reg D1 Req Di Stmt Income Stmt of Changes Balance Sheet of Cash Flows Prepare the statement of changes in stockholders' equity JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 1 Beginning common stock $ $ 0 Plus: Stock issued 15,000 Ending common stock $ 15,000 Beginning retained earnings 0 Plus: Net income 32,700 Ending retained earnings 32,700 Total stockholders' equity $ 47,700 $ Reg D1 Req D1 Stmt Reg D1 Req D1 Stmt Income Stmt of Changes Balance sheet of Cash Flows Prepare the balance sheet for Year 1. $ 41,100 JOVA COMPANY Balance Sheet As of December 31, Year 1 Assets Cash Accounts receivable $ 8,000 Less: Allowance for doubtful accounts 1,400 Total assets Liabilities Stockholders' equity Common stock $ 15,000 Retained earnings 32,700 6,600 47,700 $ $ 0 Total stockholders' equity Total liabilities and stockholders' equity 47,700 47,700 $ JOVA COMPANY Statement of Cash Flows For the Year Ended Year 1 Cash flows from operating activities: Inflow from customers $ 62,000 Outflow for expenses (35,900) $ 26,100 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities 0 $ Net cash flow from financing activities Net change in cash 0 0 26,100 Ending cash balance $ 26,100