The following transactions apply to Jova Company for Year 1, the first year of operation: 1. Issued $18,000 of common stock for cash. 2. Recognized $62,000 of service revenue earned on account. 3. Collected $55,600 from accounts receivable. 4. Paid operating expenses of $37,000. 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 2 percent of sales on account. The following transactions apply to Jova for Year 2: 1. Recognized $69,500 of service revenue on account. 2. Collected $63,600 from accounts receivable. 3. Determined that $840 of the accounts receivable were uncollectible and wrote them off. 4. Collected $200 of an account that had previously been written off. 5. Paid $47,900 cash for operating expenses. 6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 1.0 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. 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 Model Event No. Assets = Liabilities + Equity Revenues Expenses = Net Income Statement of Cash Flow Year 1 1. + FA 2. 3. = + = 4 = 5 Year 2 2. 3 4a 4b 5. 6. Reg C1 Reg C2 Organize the transaction data in accounts under an accounting equation for Year 1. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.) Assets JOVA COMPANY Accounting Equation for the Year 1 Equity Liabilities + Common Retained Stock Earnings Event Accounting Titles for Retained Earnings Cash NRV Accounts Receivable + + 1. + + = + + + + + 2. 3. + + + 4. + + + 5. + + + + + Bal. Reg C1 Reg C2 Organize the transaction data in accounts under an accounting equation for Year 2. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.) JOVA COMPANY Accounting Equation for the Year 2 Equity Liabilities Common Retained + Stock Earnings Assets NRV Accounts + Receivable Event = + Accounts Titles for Retained Earnings Cash Bal. + = + + 1. + + + + 2. + + 3. + 4a. + + 4b. = + + + + + + + + | + + 5. = + + + 6. + Bal. + Req Di Inc Stmt Req Di Stmt of Changes Reg Di Bal Sheet Req D1 Stmt of Cash Flows Prepare the income statement for Year 1. JOVA COMPANY Income Statement For the Year Ended Year 1 Expenses Total expenses Req Di Inc Stmt Req Di Stmt of Changes Reg Di Bal Sheet Req D1 Stmt of Cash Flows Prepare the income statement for Year 1. JOVA COMPANY Income Statement For the Year Ended Year 1 Expenses Total expenses Reg Di Inc Stmt Reg Di Stmt of Changes Reg Di Bal Sheet Reg Di Stmt of Cash Flows Prepare the statement of changes in stockholders' equity for Year 1. JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 1 Beginning common stock Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity Req Di Inc Stmt Reg Di Stmt of Changes Reg Di Bal Sheet Reg D1 Stmt of Cash Flows Prepare the balance sheet for Year 1. JOVA COMPANY Balance Sheet As of December 31, Year 1 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Req Di Inc Stmt Req D1 Stmt of Changes Req Di Bal Sheet Req Di Stmt of Cash Flows Prepare the statement of cash flows for Year 1. (Cash outflows should be indicated with a minus sign.) JOVA COMPANY Statement of Cash Flows For the Year Ended Year 1 Cash flows from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance Req D2 Inc Stmt Reg D2 Stmt of Changes Req D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the income statement for Year 2. JOVA COMPANY Income Statement For the Year Ended Year 2 Expenses Total expenses Req D2 Inc Stmt Req D2 Stmt of Changes Reg D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the statement of changes in stockholders' equity for Year 2. JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 2 Beginning common stock Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity Req D2 Inc Stmt Req D2 Stmt of Changes Reg D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the balance sheet for Year 2. JOVA COMPANY Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Req D2 Inc Stmt Reg D2 Stmt of Changes Req D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the statement of cash flows for Year 2. (Cash outflows should be indicated with a minus sign.) JOVA COMPANY Statement of Cash Flows For the Year Ended Year 2 Cash flows from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Ending cash balance The following transactions apply to Jova Company for Year 1, the first year of operation: 1. Issued $18,000 of common stock for cash. 2. Recognized $62,000 of service revenue earned on account. 3. Collected $55,600 from accounts receivable. 4. Paid operating expenses of $37,000. 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 2 percent of sales on account. The following transactions apply to Jova for Year 2: 1. Recognized $69,500 of service revenue on account. 2. Collected $63,600 from accounts receivable. 3. Determined that $840 of the accounts receivable were uncollectible and wrote them off. 4. Collected $200 of an account that had previously been written off. 5. Paid $47,900 cash for operating expenses. 6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncollectible accounts expense will be 1.0 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. 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 Model Event No. Assets = Liabilities + Equity Revenues Expenses = Net Income Statement of Cash Flow Year 1 1. + FA 2. 3. = + = 4 = 5 Year 2 2. 3 4a 4b 5. 6. Reg C1 Reg C2 Organize the transaction data in accounts under an accounting equation for Year 1. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.) Assets JOVA COMPANY Accounting Equation for the Year 1 Equity Liabilities + Common Retained Stock Earnings Event Accounting Titles for Retained Earnings Cash NRV Accounts Receivable + + 1. + + = + + + + + 2. 3. + + + 4. + + + 5. + + + + + Bal. Reg C1 Reg C2 Organize the transaction data in accounts under an accounting equation for Year 2. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.) JOVA COMPANY Accounting Equation for the Year 2 Equity Liabilities Common Retained + Stock Earnings Assets NRV Accounts + Receivable Event = + Accounts Titles for Retained Earnings Cash Bal. + = + + 1. + + + + 2. + + 3. + 4a. + + 4b. = + + + + + + + + | + + 5. = + + + 6. + Bal. + Req Di Inc Stmt Req Di Stmt of Changes Reg Di Bal Sheet Req D1 Stmt of Cash Flows Prepare the income statement for Year 1. JOVA COMPANY Income Statement For the Year Ended Year 1 Expenses Total expenses Req Di Inc Stmt Req Di Stmt of Changes Reg Di Bal Sheet Req D1 Stmt of Cash Flows Prepare the income statement for Year 1. JOVA COMPANY Income Statement For the Year Ended Year 1 Expenses Total expenses Reg Di Inc Stmt Reg Di Stmt of Changes Reg Di Bal Sheet Reg Di Stmt of Cash Flows Prepare the statement of changes in stockholders' equity for Year 1. JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 1 Beginning common stock Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity Req Di Inc Stmt Reg Di Stmt of Changes Reg Di Bal Sheet Reg D1 Stmt of Cash Flows Prepare the balance sheet for Year 1. JOVA COMPANY Balance Sheet As of December 31, Year 1 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Req Di Inc Stmt Req D1 Stmt of Changes Req Di Bal Sheet Req Di Stmt of Cash Flows Prepare the statement of cash flows for Year 1. (Cash outflows should be indicated with a minus sign.) JOVA COMPANY Statement of Cash Flows For the Year Ended Year 1 Cash flows from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance Req D2 Inc Stmt Reg D2 Stmt of Changes Req D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the income statement for Year 2. JOVA COMPANY Income Statement For the Year Ended Year 2 Expenses Total expenses Req D2 Inc Stmt Req D2 Stmt of Changes Reg D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the statement of changes in stockholders' equity for Year 2. JOVA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended Year 2 Beginning common stock Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity Req D2 Inc Stmt Req D2 Stmt of Changes Reg D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the balance sheet for Year 2. JOVA COMPANY Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' equity Total stockholders' equity Total liabilities and stockholders' equity Req D2 Inc Stmt Reg D2 Stmt of Changes Req D2 Bal Sheet Req D2 Stmt of Cash Flows Prepare the statement of cash flows for Year 2. (Cash outflows should be indicated with a minus sign.) JOVA COMPANY Statement of Cash Flows For the Year Ended Year 2 Cash flows from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Ending cash balance