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 leave the cell blank if there is no effect. Also, in the Cash Flow 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. $($Hint$.$ Closing entries do not affect the statements model.$)($If there is no effect on the Statement of Cash Flow, leave the

cell blank. Not all cells will require entry.$)$

JOVA COMPANY

Horizontal Statements ModelRequired information

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$[$The following information applies to the questions displayed below.$]$

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

Issued $$12,000$ of common stock for cash.

Recognized $$67,000$ of service revenue earned on account.

Collected $$59,600$ from accounts receivable.

Paid operating expenses of $$35,300.$

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 $2$:

Recognized $$74,500$ of service revenue on account.

Collected $$67,600$ from accounts receivable.

Determined that $$940$ of the accounts receivable were uncollectible and wrote them off.

Collected $$200$ of an account that had previously been written off.

Paid $$48,900$ cash for operating expenses.

Adjusted the accounts to recognize uncollectible accounts expense for Year $2.$ Jova estimates uncollectible accounts expense will be $1\mathrm{.}0$ 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 $2.$

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 leave the cell blank if there is no effect. Also, in the Cash Flow 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. $($Hint: Closing entries do not affect the statements model.$)($If there is no effect on the Statement of Cash Flow, leave the cell blank. Not all cells will require entry.$)$

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