Question

Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy Year 2 Year 1 Amounts billed to clients for services rendered Cash collected from clients Cash disbursements Salaries paid to employees for services rendered during the year Utilities Purchase of insurance policy $176,000 $226,000 193,000 163,800 93,000 103,000 31,500 60,900 43,000 In addition, you learn that the firm incurred utility costs of $36.500 in vear 1. that theere were no liabilities at the end of year 2, no anticipated bad debts on recervables, and that the insurance policy covers a three-year period. Required: 1. & 3. Calculate the net operating cash flow for years 1 and 2 and determine the amount of receivables from clients that the firm would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. 2. Prepare an income statement for each year according to the accrual accounting model. Complete this question by entering your answers in the tabs below.

Answer 1

	Year 1	Year 2
Cash collected from Customers	163000	193000
Payments:
Salaries paid	-93000	-103000
Utilities	-31500	-43000
Insurance policy	-60900
Net Operating cash flow	-22400	47000
Account receivable	13000	46000
1st year is 176000 -163000=13000
2nd year (13000+226000-193000)=46000
Income Statement
	Year 1	Year 2
Revenue	176000	226000
Expenses
Salaries	93000	103000
Utilities	36500	38000
Insurance	20300	20300
Net income	26200	64700
Note : 2nd Year Utilities , unpaid utilities (36500-31500) = 5000 then utilities is 43000 -5000= 38000
Insurance for 3 years 60900 , then each year 60900/3= 20300