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
Amounts billed to clients for services rendered	$	172,000		$	222,000
Cash collected from clients		161,000			191,000
Cash disbursements
Salaries paid to employees for services rendered during the year		91,000			101,000
Utilities		30,500			41,000
Purchase of insurance policy		60,300			0

In addition, you learn that the company incurred utility costs of $35,500 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 company 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.

Requirement 1 and 3

Calculate the net operating cash flow for years 1 and 2 and determine the amount of receivables from clients that the company 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

Requirement 2

Prepare an income statement for each year according to the accrual accounting model.

PETE, PETE, AND ROY
Income Statements
	Year 1	Year 2
Revenues
Expenses:
Salaries
Utilities
Insurance
Net income (loss)