Listed below are several transactions that took place during the first two years
ID: 2377672 • Letter: L
Question
Listed below are several transactions that took place during the first two years of operations for the accounting firm of Haskins and Price.
Year 1 Year 2
Amounts billed to customers for services
rendered................................................. $380,000 $440,000
Cash collected from customers ................. 330,000 450,000
Cash disbursements:
Payment of rent for two years................. 60,000 - 0 -
Salaries paid to employees for services
rendered during the year....................... 200,000 210,000
Travel....................................................... 50,000 60,000
Utilities ................................................... 30,000 50,000
In addition, you learn that the company incurred utility costs of $40,000 in year one, that there were no liabilities at the end of year two, and no anticipated bad debts on receivables.
Required:
1 Calculate the net operating cash flow for years 1 and 2.
2. Prepare an income statement for each year according to the accrual accounting model.
3. Determine the amount of receivables from customers that the company would show on its year 1 and year 2 balance sheets prepared according to the accrual accounting model.
Explanation / Answer
1. NET OPERATING CASH FLOW STATEMENT OF HASKINS AND PRICE FOR TWO YEARS:
Conclusion : Net operating cash flow of Haskins and Price for the two years is as follows
YEAR 1 : $(10000) (Cash outflow is more than the cash inflow for the year one.
YEAR 2 : $130,000 (Cash inflow is more than the cash outflow for the year two.
2. INCOME STATEMENT OF HASKINS AND PRICE FOR TWO YEARS:
Conclusion : Based on the accrual accounting model Income/(Loss) of the Haskins and Price for the two years is as followos:
YEAR 1 : $60,000
YEAR 2 : $100,000
3. THE AMOUNT OF RECIEVABLES STATEMENT FROM CUSTOMERS:
Conclusion : Based on the accrual accounting model, in the balance sheet of Haskins and Price the amount of recievables is as follows for two years:
YEAR 1 : $50000
YEAR 2 : $40000
YEAR 1 YEAR 2 Cash reciepts from Customers330000.00 450000.00
Total operating cash inflow
330000.00 450000.00 Rent
(60000.00) 0.00 Salaries
(200000.00) (210000.00) Travel
(50000.00) (60000.00) Utilities
(30000.00) (50000.00) Total operating cash outflow
(340000.00) (320000.00)
Net operating Cash flow (10000.00) 130000.00
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