1. Sarah operates a freelance consulting business specializing in marketing strategy. During the year 2023, Sarah's financial transactions are as follows:

Transactions (in $)	Amount
Cash Receipts	80,000
Accounts Receivable Collected	15,000
Cash Payments	50,000
Accounts Payable Paid	10,000
Prepaid Expenses	5,000

1. Requirements:
   • Prepare Sarah's income statement for the year using the modified cash basis.
   • Calculate the net income considering only cash receipts and payments.
   • Discuss the impact of including accounts receivable collected and accounts payable paid on financial reporting.
   • Analyze how prepaid expenses affect cash flow under the modified cash basis.