Question

The following transactions apply to Jova Company for Year 1, the first year of operation:

Issued $19,000 of common stock for cash.

Recognized $219,000 of service revenue earned on account.

Collected $171,900 from accounts receivable.

Paid $134,000 cash for operating expenses.

Adjusted the 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:

Recognized $329,000 of service revenue on account.

Collected $344,000 from accounts receivable.

Determined that $2,600 of the accounts receivable were uncollectible and wrote them off.

Collected $1,700 of an account that had previously been written off.

Paid $214,000 cash for operating expenses.

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.

Complete the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior to beginning the requirements for Year 2.

Effects of transaction on financial statement

General Journal

Income Statement

Statement of Changes in Stockholders' Equity

Balance Sheet

Statement of Cash Flows

Closing entries

Use the straight-line method to compute the depreciation expense for Year 1 and Year 2

Answer 1

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Year -1
Journal:
Date	Account	Debit	Credit
a	Cash	$ 19,000
	Common Stock		$    19,000
b	Accounts Receivable	$219,000
	Service Revenue		$ 219,000
c	Cash	$171,900
	Accounts Receivable		$ 171,900
d	Operating Expense	$134,000
	Cash		$ 134,000
e	Bad Debt Expense	$    2,190
	Allowance for Doubtful Accounts		$      2,190
	(219000*1%)
	Income Statement
	Service Revenue		$ 219,000
	Less: Operating Expense		$ 134,000
	Less: Bad debt Expense		$      2,190
	Net Income		$    82,810
	Statement of Retained Earning
	Beginning, Retained Earning		$            -
	Add: Net Income		$    82,810
	Less: Withdrawal		$            -
	Ending, Retained Earning		$    82,810
	Balance Sheet
	Assets
	Current Assets:
	Cash		$    56,900
	Accounts Receivable	$ 47,100
	Less: allowance for doubtful accounts	$   -2,190	$    44,910
	Total Assets		$ 101,810
	Common Stock		$    19,000
	Retained Earning		$    82,810
	Total Liabilities and Equity		$ 101,810
	Statement of Cash Flow
	Cash Received from Receivables		$ 171,900
	Cash paid for Operating Expense		$-134,000
	Net Cash flow from Operating Activities		$    37,900
	Cash flow from Investing activities:
	Net Cash from Investing Activities		$            -
	Cash flow from financing activities:
	Issue of Common Stock		$    19,000
	Net Cash from Financing Activities		$    19,000
	Net Increase in Cash		$    56,900
	Add: Beginning Balance		$            -
	Ending Balance		$    56,900
	Closing Entries:
Date	Account	Debit	Credit
a	Service Reveune	$219,000
	Income Summary		$ 219,000
b	Income Summary	$136,190
	Operating Expense		$ 134,000
	Bad Debt Expense		$      2,190
c	Income Summary	$ 82,810
	Retained Earning		$    82,810

Year -2
Journal:
Date	Account	Debit	Credit
a	Accounts Receivable	$ 329,000
	Service Revenue		$   329,000
b	Cash	$ 344,000
	Accounts Receivable		$   344,000
c	Allowance for Doubtful Accounts	$      2,600
	Accounts Receivable		$        2,600
d1	Accounts Receivable	$      1,700
	Allowance for Doubtful Accounts		$        1,700
d2	Cash	$      1,700
	Accounts Receivable		$        1,700
e	Operating Expense	$ 214,000
	Cash		$   214,000
f	Bad Debt Expense	$      1,645
	Allowance for Doubtful Accounts		$        1,645
	(329000*0.5%)
	Income Statement
	Service Revenue		$   329,000
	Less: Operating Expense		$   214,000
	Less: Bad debt Expense		$        1,645
	Net Income		$   113,355
	Statement of Retained Earning
	Beginning, Retained Earning		$     82,810
	Add: Net Income		$   113,355
	Less: Withdrawal		$              -
	Ending, Retained Earning		$   196,165
	Balance Sheet
	Assets
	Current Assets:
	Cash		$   188,600
	Accounts Receivable	$    29,500
	Less: allowance for doubtful accounts	$     -2,935	$     26,565
	Total Assets		$   215,165
	Common Stock		$     19,000
	Retained Earning		$   196,165
	Total Liabilities and Equity		$   215,165
	Statement of Cash Flow
	Cash Received from Receivables		$   345,700
	Cash paid for Operating Expense		$ -214,000
	Net Cash flow from Operating Activities		$   131,700
	Cash flow from Investing activities:
	Net Cash from Investing Activities		$              -
	Cash flow from financing activities:
	Issue of Common Stock		$              -
	Net Cash from Financing Activities		$              -
	Net Increase in Cash		$   131,700
	Add: Beginning Balance		$     56,900
	Ending Balance		$   188,600
	Closing Entries:
Date	Account	Debit	Credit
a	Service Reveune	$ 329,000
	Income Summary		$   329,000
b	Income Summary	$ 215,645
	Operating Expense		$   214,000
	Bad Debt Expense		$        1,645
c	Income Summary	$ 113,355
	Retained Earning		$   113,355