Peters Company was in business for two years, during which it entered into the following transactions. Year 1 1. The owners contributed $24,000 cash. 2. At the beginning of the year, rented a warehouse for two years with a prepaid rent payment of $12,000. 3. Purchased $10,000 of inventory on account. 4. Sold half the inventory for $24,000, receiving $20,000 in cash and an account receivable of $4,000. 5. Paid wages of $6,000 and also accrued wages payable of $4,000. YEAR 2 1. Paid the outstanding balance for the inventory purchased in Year 1. 2. Paid the outstanding wages payable balance. 3. Sold the remaining inventory for $30,000 cash. 4. Received full payment on the outstanding accounts receivable. 5. Incurred and paid wages of $12,000. 6. Returned the cash balance to the owners and shut down operations. REQUIRED:

a. Prepare an income statement and a statement of cash flows (direct method) for both Year 1 and Year 2.

b. Complete a chart like the following. Performance Measure Year 1 Year 2 Total Net income Net cash flow from operating activities (Assessing economic consequences) '