Required information Problem 522 Accounting for uncollectibl

Required information

Problem 5-22 Accounting for uncollectible accounts-two cycles using the percent of revenue allowance method LO 5-1

[The following information applies to the questions displayed below.]

The following transactions apply to Jova Company for 2018, the first year of operation:

1) Issued $10,000 of common stock for cash.

2) Recognized $210,000 of service revenue earned on account.

3) Collected $162,000 from accounts receivable.

4) Paid operating expenses of $125,000.

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 1 percent of sales on account.

The following transactions apply to Jova for 2019:

1) Recognized $320,000 of service revenue on account.

2) Collected $335,000 from accounts receivable.

3) Determined that $2,150 of the accounts receivable were uncollectible and wrote them off.

4) Collected $800 of an account that had previously been written off.

5) Paid $205,000 cash for operating expenses.

6) Adjusted the accounts to recognize uncollectible accounts expense for 2019. Jova estimates uncollectible accounts expense will be 0.5 percent of sales on account.

Required

Complete the following requirements for 2018 and 2019. Complete all requirements for 2018 prior to beginning the requirements for 2019.

JOVA COMPANY Accounting Equation for the Year 2018 Assets Equity Accounting Titles for Retained Earnings Event Cash Accounts Liabilities+Common + Retained Earnings Receivable Allowance stock 2. Bal

Solution

JOVA COMPANY Accounting Equation For The Year 2018 Event Assets = Liabilities + Equity Accounting Titles for Retained Earnings Cash + Accounts Receivable - Allowance Common Stock + Retained Earnings 1.        10,000.00 + - = +      10,000.00 + 2.                       -   +     210,000.00 - = + +     210,000.00 Service Revenue 3.     162,000.00 + (162,000.00) -                   -   =                    -   +                     -   +                       -   4. (125,000.00) + - = + + (125,000.00) Operating Expenses 5.                       -   +                       -   -      2,100.00 = + +        (2,100.00) Allowance for Doubtful Account Bal.        47,000.00 +        48,000.00 -      2,100.00 =                    -   +      10,000.00 +        82,900.00 JOVA COMPANY Accounting Equation For The Year 2019 Event Assets = Liabilities + Equity Accounting Titles for Retained Earnings Cash + Accounts Receivable - Allowance Common Stock + Retained Earnings Bal.        47,000.00 +        48,000.00 -      2,100.00 =                    -   +      10,000.00 +        82,900.00 1.                       -   +     320,000.00 - = + +     320,000.00 Service Revenue 2.     335,000.00 + (335,000.00) - = + + 3. +        (2,150.00) -    (2,150.00) =                    -   +                     -   +                       -   4a. +              800.00 -          800.00 = + + 4b.              800.00 +           (800.00) - = + + 5 (205,000.00) + = + + (205,000.00) Operating Expenses 6 +          850.00 = + +           (850.00) Allowance for Doubtful Account Bal.     177,800.00 +        30,850.00 -      1,600.00 =                    -   +      10,000.00 +     197,050.00 Allowance For Doubtful Accounts Beg. Bal.    2,100.00 Accounts Receivable    2,150.00       800.00 Accounts Receivable       850.00 Bad Debts End. Bal.    1,600.00