Question

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

Issued $15,500 of common stock for cash.

Recognized $64,500 of service revenue earned on account.

Collected $57,600 from accounts receivable.

Paid operating expenses of $36,000.

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 2 percent of sales on account.

The following transactions apply to Jova for Year 2:

Recognized $72,000 of service revenue on account.

Collected $65,600 from accounts receivable.

Determined that $890 of the accounts receivable were uncollectible and wrote them off.

Collected $300 of an account that had previously been written off.

Paid $48,400 cash for operating expenses.

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. d-1.

Prepare the income statement, statement of changes in stockholdersâ equity, balance sheet, and statement of cash flows for Year 1.

Answer 1

Income statement balance for year 1 = $27210

Income statement balance for year 2 = $22880

Step-by-step explanation:

Jova Company Year 1 Balance Sheet

ASSETS Stockholder's Equity

S/no ( Cash, Account receivable, Allowance) (Stock, Earning)

1. $15,500 $15,500

2 $64,500 $64,500

3. $57,600 -$57,600

4. -$36,000 -$36,000

5. $1,290 -$1,290

Bal. $37,100 $6,900 $1,290 $15,500 $27,210

Bad debt expense = 64500*2% =$1,290

Jova Company Year 2 Balance Sheet

ASSETS Stockholder's Equity

S/no ( Cash, Account receivable, Allowance) (Stock earning)

Bal. $37,100 $6,900 $1,290 $15,500 $27,210

1 $72,000 $72,000

2. $65,600 -$65,600

3. -$890 -$890

4. $300 $300

5 $300 -$300

6. -$48,400 -$48,400 7. $720 -$720

Bal. $54,600 $12,410 $1,420 $15,500 $50,090

Bad debt expense = 72000*1% $720

INCOME STATEMENT FOR YEAR 1

Revenues - Expenses = Net income

$64,500 - $64,500

$36,000 -$36,000

$1,290 -$1,290

BALANCE: $27210

INCOME STATEMENT FOR YEAR 2

Revenues - Expenses = Net income

$72,000 - $72,000

$48,400 -$48,400

$720 -$720

BALANCE: $ 22880