Req 1 & 3 Calculate the net operating cash flow for years 1 and 2 and determine

Question

Req 1 & 3

Calculate the net operating cash flow for years 1 and 2 and determine the amount of receivables from clients that the company would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. (Net cash outflow s should be indicated by a minus sign.)

1. Net operating cash flow: for year 1 & year 2

3. Receivables: for year 1 year 2

Req 2

Prepare an income statment for each year according to the accrual accounting model.

PETE ,PETE, AN ROY

Income Statements

Year 1 | Year 2

Revenues

Expenses:

Sallaries

Utilities

Insurance

Net income (loss)

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 1 Year 2 $186,000 $236,000 152,000 182,000 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 82,0 92,000 26,000 32,000 57,600 In addition, you learn that the company incurred utility costs of $31,000 in year 1, that there were no liabilities at the end of year 2, no anticipated bad debts on receivables, 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 company 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.

Explanation / Answer

1 Year 1 Year 2 Cash collected from customers 152000 182000 Cash disbursements: Salaries paid to employees 82000 92000 Utilities 26000 32000 Purchase of insurance policy 57600 0 Total Cash disbursements 165600 124000 Net operating cash flow -13600 58000 2 Year 1 Year 2 Revenue 186000 236000 Expenses: Salaries -82000 -92000 Utilities -31000 -27000 Insurance -19200 -19200 Net income 53800 97800 3 Amount of receivables Year 1 = 186000-152000= 34000 Year 2 = 236000-182000+34000= 88000

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