A B C D 1 2 Listed below are several transactions that took place during the first two years of operations for an accounting firm: 3 4 Year 1 Year 2 5 Amounts billed to clients for services rendered $260,000 $325,000 6 Cash collected from clients 208,000 293,000 7 Cash disbursements: 8 Salaries paid to employees for services rendered during the year 104,000 130,000 9 Utilities 62,000 87,000 10 Purchase of insurance policy 64,000 0 11 Additional information: 12 Utility costs year 1 50,000 13 Liabilities at the end of year 2 0 0 4 years 14 Anticipated bad debts on receivables Insurance policy term 17 Required: 18 19 1. Calculate the net operating cash flow for years 1 and 2. 20 2. Calculate the amount of receivables from clients that the firm would show in its year 1 and year 2 balance sheets prepared according to the 22 accrual accounting model. 28 30 15676222222222222223 33 24 Year 1 ($22,000) 3. Prepare an income statement for each year according to the accrual accounting model. Income Statements - Accrual basis 26 Revenues 27 Expenses: Salaries 29 Utilities Insurance Net income (loss) Year 2 $76,000 Year 1 $260,000 Year 2 $325,000 104,000 130,000 50,000 34