Listed below are several transactions that took place during the first two years of operations for the law firm of Perez Associates.

Year $1$ Year $2$

Amounts billed to clients for services rendered $ $186,000$ $ $236,000$

Cash collected from clients $168,000198,000$

Cash disbursements:

Salaries paid to employees for services rendered during the year $98,000108,000$

Utilities $34,00048,000$

Purchase of insurance policy $62,4000$

In addition, you learn that the firm incurred utility costs of $$39,000$ 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.