b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing actlvity (IA), or financing activity (FA), The first transaction is entered as an example. (Hint Closing entries do not affect the statements model.) Note: Leave cells blank if no input is needed. \begin{tabular}{|c|c|c|c|c|c|c|c|c|c|c|c|c|} \hline Event & Assets & = & Liabilities & + & Equity & Revenues: & - & Expenses & = & Net income & \multicolumn{2}{|c|}{ Statement of Cash Flows } \\ \hline \multicolumn{13}{|l|}{ Year 1} \\ \hline 1. & Increase & = & & 1+ & Increase & & - & & = & & Increase & FA \\ \hline 2. & & = & & + & & & - & & =P & & & \\ \hline 3. & & = & & , & & & - & & = & & & \\ \hline 4. & & = & & 4 & & & -7 & & = & & & \\ \hline 5. & & = & & + & & & -7 & & = & & & \\ \hline \multicolumn{13}{|l|}{ Year 2} \\ \hline 1. & & = & & 1+ & & & 11 & & =1 & & & \\ \hline 2 & & = & & , & & & - & & = & & & \\ \hline 3. & & = & & . & & & -1 & & = & & & \\ \hline 4a. & & = & & . & & & - & & = & & & \\ \hline 4b. & & = & & + & & & - & & = & & & \\ \hline 5. & & = & & . & & & - & 4 & = & & & \\ \hline 6. & & = & & + & & & - & & = & & & \\ \hline \end{tabular} Required information [The following information applies to the questions displayed bolow] The foliowing 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 recelvable 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
