Question

[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 $17,000 of common stock for cash. 2. Recognized $217,000 of service revenue earned on account. 3. Collected $169,700 from accounts receivable. 4. Paid $132,000 cash for operating expenses. 5. 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: 1. Recognized $327,000 of service revenue on account. 2. Collected $342,000 from accounts receivable. 3. Determined that $2,500 of the accounts receivable were uncollectible and wrote them off. 4. Collected $1,500 of an account that had previously been written off. 5. Paid $212,000 cash for operating expenses. 6. 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.

Answer 1

Solution:

As required following are the journal entries for Year 1 Transactions:

Event Working Account Name Cash Common Stock Debit $ 1 Credit 17,000 g $ 17,000 2 $ 217,000 Accounts Receivable Service Revenue $ 217,000 3 $ 169,700 Cash Accounts Receivable $ 169,700 4 $ 132,000 Operating Expenses Cash $ 132,000 5 $ 2,170 Uncollectible/Bad Debt Expenses Allowance for Uncollectible 217000 * 1% 2,170 $