Required information Problem 7-17A (Algo) Accounting for uncollectible accounts: two cycles using the percent of revenue allowance method LO 7-1 (The following information applies to the questions displayed below.] The following transactions apply to Jova Company for Year 1, the first year of operation: 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. Problem 7-17A (Algo) Part a a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange). Event No. Type of Transaction Year 1 1. 2. 3. 4. 5. Year 2 1. 2. 3. 4a. 4b. 5. 6. Required information Problem 7-17A (Algo) Accounting for uncollectible accounts: two cycles using the percent of revenue allowance method LO 7-1 (The following information applies to the questions displayed below.] The following transactions apply to Jova Company for Year 1, the first year of operation: 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 Problem 7-17A (Algo) Part b b. Show the effect of each transaction on the elements of the financial statements, using a horizontal statements model like the one shown here. The first transaction is entered as an example. (Columns for events that have no effect on any of the elements should be left blank.) (Use + for increase or - for decrease. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Not all cells will require input.) JOVA COMPANY Horizontal Statements Model Balance Sheet Income Statement Stockholders = Liabilities + Revenues Equity Expenses = Net Income Event No. Statement of Cash Flows Assets Year 1 1. + + + + FA 2. = + 3. + 4. + 5. = + Year 2 1. + 2. + 3. + 4a. + 4b. = + 5. + 6. +
