Required information [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. Pald $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. 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. 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 or - for decrease. 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. (Columns for events that have no effect on any of the elements should be left blank.) (Note: Not all cells will require an input.) JOVA COMPANY Horizontal Statements Model Event Assets - Liabilities+ Statement of Cash Flow Equity Revenues No. Expenses Net Income Year 1 1. FA 2. %3D 3. %3D 4. 5. Year 2 1. 2. 3. 4a. 4b. 5. 6. Required C1 Required C2 Organize the transaction data in accounts under an accounting equation for Year 1. (Enter any decreases to account balances with a minus sign. No "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed. JOVA COMPANY Accounting Equation for the Year 1 Assets Equity Retained Earnings Event Accounting Titles for Retained Earnings Accounts Liabilities Cash Common stock Allowance Receivable 1. 2. 3. %3D 4. 5. Bal. ol + Required C1 Required C2 Required C1 Required C2 Organize the transaction data in accounts under an accounting equation for Year 2. For event 4, reinstate the customer's account receivable in of payment on account in 4b. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Ear an input - leave cells blank if there is no corresponding Retained Earnings input needed.) JOVA COMPANY Accounting Equation for the Year 2 Assets Equity Accounts Titles for Retained Event Liabilities Accounts Receivable Common Retained Earnings Earnings Cash Allowance Stock Bal. 1. 2. 3. 4a. 4b. 5. 6. Bal.
