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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 $13,500 of common stock for cash. 2. Recognized $68,500 of service revenue earned on account 3. Collected $60,800 from accounts receivable. 4. Pald operating expenses of $35,600. 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 $76,000 of service revenue on account 2. Collected $68,800 from accounts receivable. 3. Determined that $970 of the accounts receivable were uncollectible and wrote them off. 4. Collected $200 of an account that had previously been written off. 5. Pald $49,200 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 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. Not all cells require input.) Assets JOVA COMPANY Accounting Equation for Year 1 Stockholders' Equity Liabilities + Common Retained stock Earnings Event Account Titles for Retained Earnings Cash + NRV Accounts Receivable + 1. 13,500+ + 13,500 + + + 2. 68,500/= + + + 88,500 Service revenue 3. 60,800+ (60.800) = + + 4. (35,600) + = + ++ 5. 1,370 + 1,370 + (35,600) Operating expenses (1.370) 31,530 Bal. 38,700 + 7.700 13,500 + Assets NRV Accounts Receivable Event JOVA COMPANY Accounting Equation for Year 2 Stockholders' Equity Liabilities + Common Retained + Stock Earnings Account Titles for Retained Earnings Cash + Bal. 1. 38,700 + + + + 2. + 3. 68,800 4a. 4b. 5. 6. + + + Bal. 107,500+ 0 + 0 0 enue Required Information Problem 7-17A (Algo) Accounting for uncollectible accounts: two cycles using the percent of revenu 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 $13,500 of common stock for cash. 2. Recognized $68,500 of service revenue earned on account. 3. Collected $60,800 from accounts receivable. 4. Pald operating expenses of $35,600. 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 $76,000 of service revenue on account 2. Collected $68,800 from accounts receivable. 3. Determined that $970 of the accounts receivable were uncollectible and wrote them off. 4. Collected $200 of an account that had previously been written off. 5. Pald $49,200 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. JOVA COMPANY Income Statement For the Year Ended Year 2 Service revenue S 88.500 X Expenses Operating expenses 35,600 X Uncollectible accounts expense 1.370 % Total expenses Net income (36,970) S 31,530 X JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 2 Beginning common stock 0 X Ending common stock Beginning retained earnings $ X S 13,500 GO $ 0 13.500 Ending retained earnings Total stockholders' equity $ 13,500 JOVA COMPANY Balance Sheet As of December 31, Year 2 Assets Cash Accounts receivable Less: Allowance for doubtful accounts Total assets S 38,700 X $ 7.700 X (1.370) X 6,330 $ 45,030 $ Liabilities Stockholders' equity Common stock Retained earnings $ 13,500 31,530 % Total stockholders' equity Total liabilities and stockholders' equity 45,030 $ 45,030 JOVA COMPANY Statement of Cash Flows For the Year Ended Year 2 Cash flows from operating activities: Inflow from customers $ 60,800 x Outflow for expenses (35.600) X $ 25,200 Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Plus: Beginning cash balance Ending cash balance 13,500 38,700 ox $ 38,700