Question

The following transactions apply to Jova Company for Year 1, the first year of operation: Issued $10,000 of common stock for cash. Recognized $210,000 of service revenue earned on account. Collected $162,000 from accounts receivable. Paid operating expenses of $125,000. 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 1 percent of sales on account. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1.

Answer 1

INCOME STATEMENT
PARTICULARS		AMOUNT
REVENUE - SERVICES		2,10,000.00
TOTAL (a)		2,10,000.00
EXPENSES:
OPERATING EXPENSES		1,25,000.00
UNCOLLECTIBLE ACCOUNT RECEIVABLES	(210000*1%)	2,100.00
TOTAL (b)		1,27,100.00
PROFIT (a - b)		82,900.00
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
CLOSING STOCKHOLDER'S EQUITY:
COMMON STOCK	10,000.00
ADD: NET PROFIT DURING THE YEAR	82,900.00	92,900.00
OPENING STOCKHOLDER'S EQUITY:
COMMON STOCK	10,000.00	10,000.00
CHANGES / INCREASE IN STOCKHOLDER'S EQUITY		82,900.00
BALANCE SHEET
ASSETS
CASH (10000+162000-125000)		47,000.00
ACCOUNTS RECEIVABLE (210000-162000-2100)		45,900.00
INVENTORY		-
EQUIPMENT		-
TOTAL ASSETS		92,900.00
LIABILITIES
COMMON STOCK		10,000.00
RETAINED EARNINGS		82,900.00
ACCOUNTS PAYABLE		-
NOTES PAYABLE		-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		92,900.00
CASH FLOW STATEMENT
CASH FLOW FROM OPERATING ACTIVITIES:
NET PROFIT AS PER INCOME STATEMENT	82,900.00
LESS: INCREASE IN ACCOUNT RECEVABLES	-45,900.00	37,000.00
CASH FLOW FROM INVESTING ACTIVITIES:
ISSUE OF COMMON STOCK		10,000.00
CASH GENERATED FROM ACTIVITIES		47,000.00
ADD: OPENING CASH & CASH EQUIVALENT		-
CLOSING CASH & CASH EQUIVALENT		47,000.00