Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy.

In addition, you learn that the company incurred utility costs of $35,000 in year one, that there were no liabilities at the end of year two, 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 similar to Illustration 1-2 on page 8 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 accountingmodel.

Transcribed Image Text:

Year 1 Year 2 Amounts billed to customers for services rendered Cash collected from customers Cash disbursements: Salaries paid to employees for services rendered during the year... Utilities Purchase of insurance policy $170,000 $220,000 160,000 190,000 90,000 30,000 40,000 0,000-o- 100,000