Computer Geniuses Limited was started in early 2021 and continued to operate until early 2024, when it was wound up due to disputes between the two principal owners. When it started, the company considered two sets of accounting policies. (Click the icon to view accounting policy set 1.) (Click the icon to view accounting policy set 2.) Actual events, cash flows, and transactions are as follows. (Click the icon to view the data.) Required Requirement a. Derive net income for 2021 to 2024 using the first set of accounting policies. For the year-end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "O" for any zero balances.) 2021 2022 2023 2024 Accounting policy set 1 - X Accounting policy set 2 Sales Operating expenses Warranty expense Use straight-line depreciation method on the firm's only asset. Use 50% declining-balance method for depreciation. The computer cost $1,400,000 and has an estimated useful life b. Estimate warranty expense as 10% of sales. Bad debt expense of four years. The year-end allowance for doubtful accounts should be 40% of b. Depreciation expense Estimate warranty expense as 9% of sales. gross accounts receivable. Estimate bad debts expense as 5% of sales. Gain on disposal Print Done Net income Print Done a a c. C Requirement b. Derive net income for 2021 to 2024 using the second set of accounting policies. For the year-end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Use a minus sign or parentheses for a loss. Enter a "0" for any zero balances.) x 2021 2022 2023 2024 Data Table Sales Operating expenses 2021 2022 2023 2024 Warranty expense Sales (all on account) $ 4,000,000 $ 4,200,000 $ 4.400,000 $ 620,000 Bad debt expense Warranties paid 320,000 336,000 451,000 223,200 or recovery Depreciation expense Proceeds on disposal of computer 445,000 Accounts receivable collected in year 3,480,000 3,360,000 4,180,000 1,497,000 Gain on disposal Accounts receivable written off in year 120,000 126,000 220,000 237,000 Net income (loss) All other expenses (paid in cash in the year incurred) 2,800,000 2,940,000 2,970,000 434,000 Requirement c. Derive the annual net cash flows for 2021 to 2024. nter any number in the edit fields and then continue to the next question. Print Done Requirement c. Derive the annual net cash flows for 2021 to 2024. Begin by calculating the annual net cash flow for 2021 and then for 2022 2023, and 2024. (Use a minus sign or parentheses for a cash outflow. Enter a "0" for any zero balances.) 2021 2022 2023 2024 Collections Cash operating expenses Warranty expense paid Purchase of capital asset Proceeds on disposal of capital asset Net cash flow Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences Sum of the net income over four years using accounting policy set 1: Sum of the net income over four years using accounting policy set 2: Sum of the net cash flows over four years: What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing Requirement f. What caused the net income in 2024 to be so high for the second set of accounting policies? The net income for 2024 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting policies recorded This means in later years and when the firm was wound up must be reversed Computer Geniuses Limited was started in early 2021 and continued to operate until early 2024, when it was wound up due to disputes between the two principal owners. When it started, the company considered two sets of accounting policies. (Click the icon to view accounting policy set 1.) (Click the icon to view accounting policy set 2.) Actual events, cash flows, and transactions are as follows. (Click the icon to view the data.) Required Requirement a. Derive net income for 2021 to 2024 using the first set of accounting policies. For the year-end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "O" for any zero balances.) 2021 2022 2023 2024 Accounting policy set 1 - X Accounting policy set 2 Sales Operating expenses Warranty expense Use straight-line depreciation method on the firm's only asset. Use 50% declining-balance method for depreciation. The computer cost $1,400,000 and has an estimated useful life b. Estimate warranty expense as 10% of sales. Bad debt expense of four years. The year-end allowance for doubtful accounts should be 40% of b. Depreciation expense Estimate warranty expense as 9% of sales. gross accounts receivable. Estimate bad debts expense as 5% of sales. Gain on disposal Print Done Net income Print Done a a c. C Requirement b. Derive net income for 2021 to 2024 using the second set of accounting policies. For the year-end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Use a minus sign or parentheses for a loss. Enter a "0" for any zero balances.) x 2021 2022 2023 2024 Data Table Sales Operating expenses 2021 2022 2023 2024 Warranty expense Sales (all on account) $ 4,000,000 $ 4,200,000 $ 4.400,000 $ 620,000 Bad debt expense Warranties paid 320,000 336,000 451,000 223,200 or recovery Depreciation expense Proceeds on disposal of computer 445,000 Accounts receivable collected in year 3,480,000 3,360,000 4,180,000 1,497,000 Gain on disposal Accounts receivable written off in year 120,000 126,000 220,000 237,000 Net income (loss) All other expenses (paid in cash in the year incurred) 2,800,000 2,940,000 2,970,000 434,000 Requirement c. Derive the annual net cash flows for 2021 to 2024. nter any number in the edit fields and then continue to the next question. Print Done Requirement c. Derive the annual net cash flows for 2021 to 2024. Begin by calculating the annual net cash flow for 2021 and then for 2022 2023, and 2024. (Use a minus sign or parentheses for a cash outflow. Enter a "0" for any zero balances.) 2021 2022 2023 2024 Collections Cash operating expenses Warranty expense paid Purchase of capital asset Proceeds on disposal of capital asset Net cash flow Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences Sum of the net income over four years using accounting policy set 1: Sum of the net income over four years using accounting policy set 2: Sum of the net cash flows over four years: What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing Requirement f. What caused the net income in 2024 to be so high for the second set of accounting policies? The net income for 2024 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting policies recorded This means in later years and when the firm was wound up must be reversed