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 1Year 2

Amounts billed to clients for services rendered $170,000$220,000

Cash collected from clients 160,000190,000

Cash disbursements

Salaries paid to employees for services rendered during the year90,000100,000

Utilities 30,00040,000

Purchase of insurance policy 60,000-0-

In addition, you learn that the firm incurred utility costs of $35,000 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. Calculate the net operating cash flow for years 1 and 2.
2. Prepare income statement for each year similar toIllustration 1-4according to the accrual accounting model.
3. 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.