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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

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 customers for services rendered $ 182,000 $ 240,000
Cash collected from customers 150,000 180,000
Cash disbursements:
Salaries paid to employees for services rendered during the year 80,000 90,000
Utilities 25,000 30,000
Purchase of insurance policy 57,000 0

In addition, you learn that the company incurred utility costs of $30,000 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 an income statement for each year according to the accrual accounting model.

3.

Determine the amount of receivables from customers that the company would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model.

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