Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, a

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16 days ago

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Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, a

nd Roy. Year 1 Year 2 Amounts billed to clients for services rendered $ 184,000 $ 234,000 Cash collected from clients 167,000 197,000 Cash disbursements Salaries paid to employees for services rendered during the year 97,000 107,000 Utilities 33,500 47,000 Purchase of insurance policy 62,100 0 In addition, you learn that the firm incurred utility costs of $38,500 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 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.

Business

1 answer:

marusya05 [3K] · Answer 1 · 2026-03-20T16:45:51+03:00

1. Calculation of Net Operating Cash Flow Particulars Year 1 $ Year 2 $ Net Operating Cash flow Cash collected from clients $167,000 $197,000 Less: Cash Disbursement Salaries $97,000 $107,000 Utilities $33,500 $47,000 Purchase of insurance policies $62,100 $0 Net Operating Cash Flow -$25,600 $43,000 Thus, the net operating cash flow for the first year is -$25,600 and for the second year is $43,000. 2. Income Statement for each year Particulars Year 1 $ Year 2 $ Revenue $184,000 $234,000 Expenses: Salaries $97,000 $107,000 Utilities $38,500 $42,000 Insurance Policy($62,100/3) $20,700 $20,700 Net Income $27,800 $64,300 Working: Utilities for year 2 = $33,500 + $47,000 - $38,500 = $42,000 3. Calculation of account receivables Particulars Year 1 $ Year 2 $ Account receivables beginning balance $0 $17,000 Add: Account billed to client $184,000 $234,000 Less: Cash collections from clients $167,000 $197,000 Ending account receivables $17,000 $54,000 Therefore, the amount of account receivables for year 1 is $17,000 and for year 2 is $54,000.