Question

Exercise 1-1 (Algo) Accrual accounting (L01-2) 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 $178,000 $228,000 156,000 186,000 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 86,000 28,000 58,800 96,000 36,000 In addition, you learn that the firm incurred utility costs of $33,000 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 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. Reg 1 and 3 Reg 2 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. (Net cash outflows should be indicated by a minus sign.) Year 1 Year 2 1. Net operating cash flow 3. Receivables 2 >

Answer 1

Requirment Yearl Year Net operating Recievable Cash flow 1-$16,800 $54,000 $22.000 $ 64,000 3. calculation of het operating cash flow Yeaol Year2 cash collected from clients | 156,00 11 8 6,000 cash disbursments Salary paid. -86000 - 96,000 Utilities |-28000 -3 GODO Insurance €58,800 I let operately cash flow 1-416,800 154,000

Reciewable Year 1 = service rendered - cash collecte $178,800 - 156,000 - 22,000 - Reciewable A/c of year 2 To balance 22,070 BY cash collected $18600 To service 1. Rendered $64,000 19228 000 By closing Balance 125oow 12.5oow

Req2 PETE_PETE, AND ROY Income Statements PETE 1 Year Year 2 5178.000 $228000 Revenus Coupen seda Salaries Utilities Insurance Net In ceme (Loss) 86,000 33,000 19,600 39.400 96,000 31,000 19.000 al you I WIN: Utilities Cost in Year 2 . Balance in yearl = outstanding 33000 - 28000 5,000 = Payment for utilities in Year 2= 30,000 Cost Incurred for villitys: 36,500 - 5,500 U = 31,000

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